More Tales From Nvidia: AI Is Still A Loss Leader (Issue #264!)
Well, per my More Tales from September (below on $META), it is amazing people could not see this coming.
It should have been obvious.
Quite the change from the numbers first reported and the big up move in the after hours, to what it is happening now after people had a chance to figure out what has happened with the balance sheet (and what might be off balance sheet) and cash flows.
Both gutted. Meta and Muse.
Cash flow negative.
This is what AI is, it is currently just a giant black hole.
It is money spent, with hope, but not purpose. It is digging holes, and filling them back up. And it is a money recycling machine on so many levels, including with all the venture-funded garbage startups that have no reason to exist, but effectively just funnel money back up the food chain in a giant money recycling operation and attempt at a self-fulfilling prophecy. Unreal that 70%-80% of frontier lab revenue might be coming from this stuff. Think about the other consumption-related ripple effects, and the ramifications.
No doubt the memos will be going out soon from the VCs to the portfolio companies, and it is going to say “start cutting your burn rate.” Eventually there is not enough money, and not a greater fool to step in line to carry the burden. Even the VCs will realize that. Character AI was just the beginning.
At any rate, what should have been obvious about Meta/Muse should be obvious about everything else too. But somehow, it isn’t?
More Circularity
Per below on all the garbage VC startups driving token spend, while corporate America with actual self financing businesses that can exist and spend of their own volition, is not because they realize AI is just an expense, here is some more data – Article, Chart, Torsten Slock Apollo:
Article: It is paywalled you can get a sense from the headline and the first few sentences you can see. The 1% of companies referenced are startups. The Torsten Slock piece that is 3rd on the list has some of the data as well: https://www.zerohedge.com/ai/1-companies-account-80-openai-and-anthropic-spending-and-it-just-stalled
Chart: In fact, adjusted for shifts in utilization rates, total factor productivity growth was zero in Q2. Said otherwise, there has been zero productivity boost from AI! In other words, paying to dig holes, and fill them back up, brought to you by the Venture Communities own circular reality.
Back to META, using the AOL gamebook of attracting eyeballs by offering a product for free…. I am not taking a “victory lap” but investors are finally realizing what I identified last month:
BY DOUG KASS · Sep 23, 2026, 7:35 AM EDT
More Tales From Nvidia: I’m Not Trying to Call the Stocks But Consider That Muse Was Offered for Free! (Issue #253)
“Muse personal AI agent is free to use with a generous weekly usage limit (such as up to 100 million tokens per week), though paid subscription tiers are available if you need higher usage capacity.”
– From AI
Does Anyone Do Their Homework Anymore?
Not that I am or have been trying to call the stocks, because that is a fool’s errand these days, especially in these types of mania-driven markets. But it is fun to occasionally comment on the markets relative to the underlying fundamentals and business issues.
Monday and Tuesday were a combination of a gamma squeeze aided and abetted by Facebook’s Muse announcement.
For those that don’t know, Muse is Facebook’s personal assistant app, a theoretical AI agent, that made it to the top of the app stores download list, helping to inspire the gamma squeeze rip of the last two days.
Why did it make it to the top of the list?Because it is both new and FREE! (I don’t recall a single person in the business media saying this!)
Hundreds of billions of investment, and this is what they have to show for it? A free, largely non-differentiated personal assistant app that Amazon (AMZN) has already cut off from shopping its site? And an app, that after the novelty factor wears off, will probably not be used all that much and likely never generate any economics, because it is free and of limited real utility and effectiveness. Guess what, people actually like shopping themselves, that is why they do it!
Heck, even Angry Birds costs money (and generates economics).
My guess, this thing goes the way of the Metaverse and Threads.
If any thing speaks volumes about AI, not sure if it is this, or it is OpenAI spending $22.5 million of compute to win a $1 million prize and needing to cheat along the way to even do that!
Coincidentally per prior on Muse, I just saw these.
The reference to Amazon is their theoretical no human convenience stores where AI was supposed to figure out everything you put in your basket. Turns out they had humans in India watching people on cameras. End of day, none of it ended up working, it lost too much money, and they shut all the stores anyway. Same for McDonald’s (MCD) automated AI ordering system, where “no onions” seemed problematic for the AI to get right. I guess I was too optimistic, hundreds of billions of investment, and Meta (META) still needs the humans too, because the AI still does not work.
Trillions of dollars of market cap added across the board due to this? And PS, Meta already paid for the junk they have in place to do this. They would have been better off buying offshore call centers for pennies on the dollar. Incidentally, that is one more thing AI was supposed to replace, but the opposite is happening, because it turns out Gen AI is multiples more expensive than cheap offshore labor.
