This is an iHeart podcast. Guaranteed human. Hans, the GC here. I'm whispering because... As the queen. Queen of social media? It's about time for my ASGMR series. So I'm recording this on my phone and then I'm going to use Canva to edit and upload it. Oh, sorry, babes. I'll make that a whisper when I edit it. Anyways, Canva makes social media edits so easy. I'll upload this in a minute. Canva, make everything iconic. How do I stop recording, Taren? Stop paying to invest. With free trade, you can invest without the legacy fees with a free ISA, a free pension and commission free investing in funds, stocks, ETFs, bonds and more. Join over 1.6 million users on Free Trade's award-winning free platform. Go to freetrade.io slash radio to get started. Capital at risk. ISA and SIP rules apply. Other charges may apply. Turn up your taste buds with dolmio intensify pasta sauces. From mild creamy garlic and black pepper... Mmm! ...to bold smoky garlic and sun-dried tomato... Whoa! ...and spicy smoked paprika and chili. Woo! Woo! Try dolmio intensify. Pasta sauces with serious flavour. Dolmio, yeah! Corson media. Hello and welcome back to Better Off Line. I'm your host, Ed Zidron. And this is the third part of our series on wanting AI bubble is worse than the dot-com bubble. And today we're going to focus on a question. What actually burst the dot-com bubble? I should also be clear, there is no clear answer to any question like this. This is kind of a difficult thing to pull apart. But to start, we're going to need a comparison. And really, the invidier of the dot-com bubble would be the companies making and selling the fiber optic cables themselves and the associated hardware. In July 2000, Corning, which made and still makes far more than just optical cables, became the largest supplier of fiber optic wires and ended 2007.1 billion in revenue on a net income of 422 million. That's profit, baby. I know we're not used to that because we talk about AI all the time. By April 2001, Corning had revised its earnings estimates down three times, estimating revenue for the year to be between 7.8 billion and 8 billion. Corning would eventually reveal net sales of 6.27 billion dollars with a loss of 5.498 billion dollars for the year. They tried to grow a little too fast. They took out loans. They did the thing that everyone does in this kind of era. Fiber optic cable from firm JDS Uniface, a conglomerate of different optical companies merged in 1999, would go on an acquisition spritid dramatically expand its fiber optic offerings, eventually crowning itself, and this is from their own press release, the number one supplier of fiber optic components and revealing net earnings of 208 million in January 2001. In July 2001, it would announce a 35% decrease in sales quarter over quarter and a 44.8 billion dollar decrease in the value of companies that it acquired on top of a net loss of 477 million dollars in the quarter. The stock would lose 99% of its value before an eventual rebrand and collapse. Okay, so now you know all that crap, let's get more specific. Nvidia currently represents 7% of the S&P 500 with a market capitalization of somewhere in the region of 4 trillion dollars. In September 2000, JDS Uniface made up 0.7% and corning 0.692% of the S&P 500. When it totaled, and it is surprisingly difficult to find the exact number, around 11.7 trillion dollars in total, with the highest weighted tech stocks being Cisco at 3.1%, Microsoft at 2.5%, Intel at 2.2%, Oracle at 1.75% and EMC at 1.7%. Now, I've had some bright sparks when I've made this point online say, Ed, Ed, what about Norto? Norto was at 1.4%, Lucent was at 0.88%. In simpler terms, the dot-com bubble didn't burst because of the market's obsession with one company, but an evenly distributed and incredibly vague sense that the future was going to be online and we all need to be involved. The world didn't wait with baited breath for every single earnings announcement from Corning or JD Uniface, nor did the health of the market depend on the continued ability to beat and raise revenues that were echelons higher than any other company in the market. Now, the problem with trying to find an exact comparison is that fiber optic cabling and GPUs are fundamentally different things, requiring, amongst other things, massive optical network terminals to actually turn big looms of cable into actual internet connections, and well, I guess that you could compare that to a data center, but all of that stuff as big as it sounds, er, no one here is as big as the Naio data center, nor was it as power intensive, nor did they require to build an entire fucking gas power station in the middle of Texas for it. The massive costs associated with the fiber build-out could make Nortel or Lucent, who each boasted record revenues in 2000 and then got the shit kicked out of them in 2001, the invidious of the dot-com bubble, if you really want, though I must insist that I think that we're going through our own thing. We're at the beginning of history, not the end of it. In any case, they're the only real revenue comparison. In vidious last quarterly revenue was $57 billion, with around 88% of that coming from its data center vertical, where it sells GPUs and the associated networking gear. In Lucent's case, the service provider network segment, where in bundled all its telecoms infrastructure like optical networking and switching, per its 2009 annual report, accounted for 78% of its $33.8 billion in revenue, a slight improvement from 1999 when it was 81% and 1998 when it was 83%. For Nortel, the comp was its service provider and carrier segment, which made 82% of its $30 billion in revenue in 2000. It gets a little confusing at this point when you try and work out whether either of their net income as Lucent had to restate revenues in 2000 and Nortel had to do so for 2001, 2002 and 2003, thanks to creative accounting principles that, in Nortel's case, overstated revenue by nearly $2 billion, probably his nerve, I guess. Nevertheless, for 2000, Lucent booked $1.219 billion in net income and Nortel, well, okay, whoopsie doodle, they lost $2 billion. Yes, things are materially different in the AI bubble. Nvidia posted $31.19 billion in net income in its last quarter, and if we are to believe Takeim, Baron's marketing arm for Nvidia, who acts like a fucking cheerleader, its largest customers are printing money to the point that there's simply no reason to worry. And in some ways, they're right. Nvidia prints money, it's incredibly profitable, has a virtual monopoly over the GPUs behind the AI bubble, and it can effectively set prices at whatever it wants to. Similarly, the companies that are buying the most GPUs, Microsoft, Meta, Google and Amazon, are all incredibly profitable themselves, which is really easy if you don't think about it for more than a minute, to take to mean that Nvidia won't end up like Lucent, Nortel or any other dot-com casualty. Now, I need to be very clear about something. Just because Nvidia isn't like Nortel or Lucent, doesn't mean that things aren't bad, and just because some of the companies that are buying these GPUs are profitable, doesn't mean that all of them are or won't die on their arses the moment the debt train stops showing up. Okay, so to really simplify the comparison here, the debt part of the dot-com bubble was about customers of telecommunications companies taking on debt and the telecommunications companies themselves taking on debt to service these contracts. These companies also did a number of aggressive acquisitions, many of which had to be marked down as I've mentioned. Lucent, Nortel and many of the other telecoms companies building out internet infrastructure would also loan money to their customers in a thing called vendor financing, leading them to have to write off hundreds of millions of dollars of debts when these customers collapsed, and in fact, Winstar, a company that did a massive deal with, and you may remember this with the Enron series, they ended up, their bankruptcy people ended up suing Lucent, getting hundreds of millions of dollars. In fact, that's a great place to start to make the comparison. Nortel's largest deals included a multi-billion dollar contract to sell stuff to now world famous fraudsters Worldcom, a bizarre three billion dollar managed services deal with global IT firm Computer Scientist that involved 2,000 Nortel employees moving into the company, and a 1.4 billion dollar 10 year long deal with the England's cable and wireless group to build, and operate the cable and wireless internet backbone throughout Europe and North America that was quickly underwater. Lucent's deals included a five billion dollar deal with Verizon, and a 1.4 billion dollar deal with other carriers to supply tech to China Unicorn. Money was flowing, but it was all in these weird directions with people that couldn't necessarily afford it, or that would lose everybody involved money. Master any task with the all electric Ford E-Transit Custom Limited with lower running cost for your business. Selected dealer stock is now available with 0% APR on four year Ford options and a 7,000 pound customer saving until the end of March at participating dealers. Search Ford E-Transit Custom. Ready, set, Ford. Finance subject to status. The comparison starts to drift when you talk about revenue centralization. Lucent, Nortel, and other dot-com bubble telecoms companies had a variety of deals in the 100 million dollar to 300 million dollar range, and many more that were in the 20 million dollar to 50 million dollar range. In 2000, AT&T accounted for 10% of Lucent's revenue and Verizon 13%. Nortel sadly didn't disclose its revenue breakdown by customer. Nortel was, however, calling his largest customer for optical cable. And fun fact, Lucent also made optical cable and was the second largest provider in the business. Despite what JD Uniface said, JD Uniface, you fucking lied to me. That one's just for Phil. Phil brought on, you're listening to this, you're gonna hear that, you're gonna go, I fucking hated JD Uniface or JDES Uniface. I learned about this company a month ago. I hate them. But that revenue centralization is very important. Nvidia's revenue is extremely centralized. In its last earnings, Nvidia noted that 61% of its revenue came from foreign-named companies, and for years, somewhere between 18% and 40% of its revenue has come from anywhere from between two and four companies, none of which it names. This is critically important because Nvidia represents, as I said, 7% of the value of the S&P 500, and the market's have an unhealthy relationship with its stock, freaking out in August 2025, when year-over-year growth was only, I am not fucking with you, expected to be around 50% year-over-year. People were freaking out. They dumped the stock for over a month. It was crazy. As a result, any stock panic caused by Nvidia will naturally drag down the entire market with it. The dot-com bubble was, as I've discussed two things, the bullshit dot-com bubble from websites and the telecommunications bubble caused by massive overbuilds of fiber optic and internet services. When the bubble burst, it was caused by rising interest rates increasing the cost of borrowing, and the market's realizing that these unprofitable companies wouldn't survive long-term, and then venture capital being depleted. And I realize it's tempting to claim we're in the same situation, but I must insist it's really quite different. At the time, venture capital was much, much smaller. For the following numbers, I'm going to give you the numbers adjusted for inflation, otherwise I'm going to be here all fucking day. US venture capital invested $23 billion in 1997, $28.21 billion in 1998, $95.5 billion in 1999, and $197.71 billion in 2000 for a grand total of $344.5 billion. A mere $6.2 billion more than the $338.3 billion raised in 2025 alone in venture capital, with somewhere between 40 and 50% of that, around $168 billion going into AI investments, and in 2024, North American AI startups only raised around $106 billion. It's growing, it's happening more. The dot com bubble burst when the bullshid.com stocks died on their ass and the world realized that the magic of the internet was not a panacea that would fix every business model, and there was no magic moment where a company like Webvan or Pets.com would turn into this magic or profitable beast from a horribly unprofitable business. Similarly companies like Lucent Technologies stopped being rewarded for doing dodgy circular deals with companies like Winstar, leading to the collapse of the telecommunications bubble that led to millions of miles of dark fiber being sold dirt cheap in 2002. The oversupply of dark fiber was eventually seen as a positive, leading to an eventual surge in demand as billions of people came online toward the end of the 2000s. Now I know what you're thinking. Ed, isn't this exactly what's happening here in the AI bubble? Isn't this the same thing? We've got overvalued startups, we've got multiple unprofitable, unsustainable AI companies promising to IPO, we've got overvalued tech stocks, and we've got one of the largest infrastructure buildouts of all time. Tech companies are trading at ridiculous multiples of their earnings per share, but the multiples aren't as high. That's good, right? No it isn't. It isn't. AI boosters and well-wishers are obsessed with making this comparison because saying things worked out after the dot com bubble allows them to rationalize doing stupid, destructive, and shitty things. Even if this was just like the dot com bubble, things would be absolutely fucking catastrophic. The NASDAQ dropped 78% from its peak in March 2000. This time, due to the incredible ignorance of both the private and public power brokers of the tech industry, I expect consequences that will range from horrifying to calamitous, depending almost entirely on how long the bubble takes to burst and how willing the SEC is to greenlight an IPO of open AI or Anthropic. I'm very worried, and tomorrow I'm going to finish up this series with a somewhat dark note, then we need to stop pretending this will be a smooth landing, or that anything will be left in its wake worth keeping. Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matosowski. You can check out more of his music and audio projects at Matosowski.com. Matosowski.com. You can email me at easy at betteroffline.com or visit betteroffline.com to find more podcast links and of course my newsletter. I also really recommend you go to chat.Where'syoured.at to visit the Discord and go to r slash betteroffline to check out our Reddit. Thank you so much for listening. Better Offline is a production of Cool Zone Media. For more from Cool Zone Media, visit our website, Coolzonemedia.com, or check us out on the iHeart Radio app, Apple Podcast, or wherever you get your podcasts. Another party invite? Well, here's a way to make their big day feel even more special. With small shops in Etsy, you can discover thousands of original birthday presents, like a handmade leather camera strap to celebrate your photography upset friend, or maybe a custom top for that Pisces in your life. From the personalized to the practical, we've got you covered with millions of active listings to choose from. Birthdays don't celebrate themselves. Shop at etsy.com and discover your perfect find today. You know what you're getting with a conference? Laptop backpacks, security pass lanyard. 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