Two stories, one week: AI lab revenue is exploding past comprehension while a $30B wunderkind hedge fund gets liquidated overnight. NLW argues they're not contradictions — they're the same story about a demand curve with miles of air above it and a market that keeps mistaking leverage for fundamentals.
The AI selloff isn't about AI — it's about leverage, macro, and mechanics.
OpenAI and Anthropic just posted their best revenue months yet, with Anthropic possibly ending the year at $100-150B. At the same time, semis crashed, Korea had its worst stock crash in history, and a famous AI hedge fund blew up. NLW's case: strip away the scary historical analogies and most of the weakness is old-fashioned leverage, forced selling, and risk-off macro — not a change in belief about AI. Underneath it all, demand for intelligence does nothing but grow, which is why revenue acceleration is the number that actually matters.
CNBC reported that at a recent all-hands, CFO Sarah Friar told staff July's annualized recurring revenue had exceeded all of Q2 — "and Q2 was no slouch." Third-party data from Funda puts OpenAI just shy of $50B in ARR.
Axios and Funda data put Anthropic at a $71B run rate, up from $47B in May. Semi Analysis had them above $60B ARR and on track for $1B in profit by quarter's end.
— Derek Thompson, former Atlantic writer, on Dwarkesh Patel's Anthropic projection. Reacting to Dwarkesh Patel's projection that Anthropic ends the year at $100-150B in revenue, Derek Thompson noted the scale of what that number would actually represent.
NLW argues only a tiny handful of companies have users deep enough to need token limits; the vast majority are still on the upswing with "miles and miles of air above them." The recent enterprise-pullback narrative is companies building smarter multi-model architectures ahead of scale — not using less AI.
NLW's view: demand for intelligence will outpace the industry's ability to bring it online for years, because building the infrastructure simply takes longer than demand grows. Cheaper models add to the top line rather than subtracting from it.
Effective Thursday, Luna dropped 80% to $1.20 per million output tokens and Terra dropped 20% to $2, with Sole held steady and a new fast mode offering a 2.5X speed boost. NLW frames it as strategic competition on cost, not a company struggling to sell intelligence.
Rising OpenAI and Anthropic revenue is what justifies larger CapEx, which justifies the debt financing behind data centers. If demand fell, none of it would make financial sense — but "at the moment when it comes to the revenue, it's just nothing but air up there."
AI bears still point to Nvidia's circular deals — louder now amid talk of Nvidia backstopping $250B of OpenAI data-center demand — plus the belief that semiconductors are cyclical and destined to crash. NLW counters that the AI-era semi trade is fundamentally different from prior cycles.
The Fed held rates but hikes may come if inflation returns, the Iran war has investors jittery, and the market has flipped decidedly risk-off. NLW stresses distinguishing genuine changes in AI belief from big stocks simply getting swept up in broader concerns.
Worse than the '90s Asian crisis or the 2008 GFC. Samsung and SK Hynix alone make up ~50% of the index, ~30% of Koreans actively trade (vs 0.2% in the US), and they love leverage — Goldman says 1.2M accounts were margin called this week and up to 360,000 were liquidated.
There's a live competition over interpreting the semi selloff: either a predictable cyclical crash as long-term AI demand is questioned, or a mechanical story of a leveraged population forced to sell into a price crash. The two readings have wildly different implications for AI markets.
Nikkei Asia estimates the figure, largely held in special-purpose vehicles rather than on balance sheets, and sliced into structured credit sold to insurers, pensions and private credit. Bears call it a subprime echo; NLW says the comparison rarely survives past the surface.
NLW cites left-leaning markets writer Nathan Tankus: believing this debt breaks the economy requires betting that hyperscalers actually default, not just see stock prices halved — a huge burden given borrower strength. And unlike CDOs, no one is treating this debt as Treasury-equivalent in the settlement system.
Google's first cash-flow-negative quarter in years sank its stock. Meta fell as analysts couldn't parse its AI strategy and Zuckerberg's 'personal superintelligence' pitch. Microsoft was rewarded for Amy Hood's promise of staying cash-flow positive, even as Azure hit $100B ARR.
— Andy Jassy, Amazon CEO. Amazon raised its CapEx forecast from $200B to $220B with AWS up 37% year over year. Jassy added the same will be true in 2027 and that 2028 demand is already "striking" — the demand story that gives hyperscalers latitude to keep spending.
Situational Awareness — which posted 439% net returns as of end of Q1 and rode Aschenbrenner's 2024 essay to billions — was margin called and liquidated into Citadel by Thursday morning. It took in ~$10B, grew to ~$30B equity, but ran at 4X leverage for ~$120B in positions.
With $30B equity controlling $120B of positions, every move is amplified fourfold — a 5% gain looks like 20%, but a 25% decline wipes out the fund entirely. Margin calls then force selling into falling prices, a vicious cycle that can lose more than the original equity.
— Martin Shkreli, on TBPN. Because SEC-registered funds disclose positions, everyone knew Situational Awareness was massively long the AI trade. Martin Shkreli described the practice of 'shooting against a fund' to TBPN — another way AI-name weakness may reflect market gamesmanship over fundamentals.
NLW argues LTCM and Bear metastasized because they touched core parts of the financial plumbing; this blowup resembles 2021's $10B Archegos — painful, tech-heavy, leveraged, but not systemic. Citadel bought the book at a rumored 20-50% discount, and Ken Griffin is playing the Buffett/JP Morgan backstop role.
With liquidation over, the mechanical incentive to short is gone. JPMorgan called buy signals Monday; the Nasdaq jumped 2.8% Thursday and Korea's KOSPI ripped 15% Friday (up 17% intraday). NLW notes it's a relief rally — but the blowup could have marked the bottom of the AI drawdown.
NLW's closing frame: AI is now so integral to the economy's structure that even non-investors should understand what's happening. The summary — continued circular-financing and debt concerns (the bubble's best pressure-release valves), a leverage-driven blowup, and beneath it all a demand story that only grows.