Mostly Economics Podcast #55: Who pays when the AI bubble bursts with Ed Zitron

A 45-minute episode of CEPR’s Mostly Economics, uploaded on 8 October 2026: Dean Baker with Ed Zitron, back for a second time. Baker plays the economist asking the plain questions, and Zitron supplies the numbers.

They start with deals that make no sense for a company with money. Amazon wants to move about $8 billion of Grace Blackwell chips into a separate vehicle and lease them back. Zitron compares it to Enron and Excite@Home; Baker calls it a loan by another name and guesses Amazon, cash-flow negative last quarter, is protecting its bond rating. Then the chips that aren’t plugged in. Zitron’s Guardian reporting found Microsoft with about 2.2 million chips and under 2 gigawatts of AI capacity, against 12 gigawatts of data centres overall, and his own estimate is that more than $200 billion of Nvidia chips are sitting somewhere unpowered. Then Oracle, which on 24 September gave force majeure notice over power delays at Project Jupiter in New Mexico, where the state has twice refused the gas pipeline. The reporting says Oracle can’t walk away from the lease. Its long bonds already yield around 8 per cent, one notch above junk, and Baker calls it the Bear Stearns of this bubble: the weakest of the big names, the one that goes first.

The second half is the bill coming due. Compute contracts are signed with almost nothing paid up front, Zitron says, like the 2007 mortgages that reset, and the real payments start in 2027. Anthropic’s prospectus, as Reuters reported it, shows $413 billion of commitments it cannot cancel. To meet them, OpenAI and Anthropic would each need to spend more a year than Microsoft’s whole operating budget, from venture money that isn’t there or bond markets already strained. His “doom loop”: slow construction piles up interest, chips, memory and copper get dearer, more borrowing pushes up Treasury yields, and the customers paying for it all are mostly startups living on venture capital that has lost money for years. Whoever made the bets, he says, retail investors and pensions will bear the losses. Baker agrees, and adds that nobody can call the timing.