"Cycular" Financing w/ GamersNexus

Hello and welcome to Better Offline, I'm your host Ed Zitron. That's right folks, we are back at it, subscribe to the newsletter, download the premium Download this episode, download all the episodes. I need those downloads or else buy some merchandise if you must. But today we are joined by the mighty Steve Burke of Gamers Nexus to talk to us about something called Cycular Finance. Cycular?

It's not a circle. It's a cycle.

They said that. This is the virtuous cycle, is it, that Jensen Huang has been talking about? Why don't you tell me? It came up in your video, but I want to hear your eloquent way of putting it.

They said that they know that, quote, some will refer to this as circular financing, end quote. But if you read some of their posts, they talk about how it's a virtuous, as you said, cycle. And as we know, cycles are not circles.

Yeah. Yeah. they're cycles they just go in a shape that might be circular but it's not the same thing as a circle.

Right it's it's really best you don't think too much about like cycle and bicycle and everything on a bicycle is moving in kind of a circular motion but it's a specifically different thing they made that very clear.

Yeah this is and so this is nvidia in their last earnings trying to justify what is obviously blatantly circular financing where they invest in someone, or they provide residual guarantees. Now, I just want to also add that they're saying they'll provide residual guarantees with data centers, but not saying what that actually means. There's lots of articles that are saying, oh, it could be this and that. NVIDIA is not actually saying anything about what it means. They've said in one post, it'd be up to 25%, but not what that would actually result in.

I've noticed this with a lot of it.

I Oh Christ. What is this?

I didn't want to jump the gun.

I'm sorry. No, please just let's get to it. Fucking.

So, yeah, I mean, as you know, the, uh, Trump administration gathered some of the AI executives, SI, sorry, I fucked that up already. SI, they've issued a, an executive order to rename artificial intelligence, the super intelligence for purposes of government documents. And, um, which just to get ahead of it is not binding and does not do anything.

And I did notice that the companies on there, it's like Anthropic, Elon Musk was on there representing, I guess, Elon Musk and whatever he does now. Jensen's signature on there, your friend Vidya. AMD was absent, but AMD did follow up and say that they were happy to support and participate. It just seemed to, it felt the same as a group project when the one kid in the group who did actually nothing, uh, hands in the paper, you know, and says, we worked very hard on this. AMD is jumping in there to say, we're, we're happy to be a part of this too, even though we weren't really fully, uh, included.

Yeah. It's such a bizarre thing. Cause they also signed this self regulatory thing as well, where they've agreed to do absolutely nothing legally binding in any way, shape or form.

Well, they did say that they would police themselves.

Oh, good. And as we've seen, look at how well regulated the tech industry is as a direct result of their regulation of themselves.

You know the Elmo meme where the background is on fire and he's waiting?

Yes, yes.

Yes, that's kind of what I'm picturing right now.

What I liked about it as well is just how all of these guys who genuinely, I'm saying this without any irony or anything, genuinely these companies have more power than the United States government. They actually do if they wielded it. But all of them The second, the absolute second Trump is like, sign the document, all of you must kiss the ring, they fall over themselves to do so.

And I mean, did you see the video of Mark Zuckerberg and him talking?

Which one?

Outside of the White House, they were talking and him and Zuckerberg were yucking it up. And people were like, oh, Zuckerberg can barely hold his laughter in. When actually what happened was the moment Trump turned away, Zuckerberg looked like he had diarrhea. He looked like he'd seen the face of God. But the best part was in the background of Trump warbling on about some shit that barely made sense.

Dario Amadei looked like he was being stabbed in the leg by a little man. He was like actively grimacing.

I did notice. I did notice that Dario, when he was asked to speak, to the reporters for a moment looked so, I don't know if it was conflicted or if he's just naturally, like, I get it like natural awkwardness I get, but that didn't really look like what that was to me.

He just looks strange. Yeah. He just looks like a weird freak. And I'm willing to call him that because someone from Anthropic in front of the Pope threatened to walk out because he, the Pope would not accept that machines were conscious.

Okay. Okay.

This thing, how are you feeling about this? Just on a personal level, how do you feel right now looking at this every day as I am?

It's bad. When NVIDIA said on their call, some will refer to this as circular financing, and they showed this sort of interest, this self-awareness for a second. I genuinely had a moment where I paused the call. And I just sat there like, oh, this is going to be really bad when it goes.

Yeah. That's how I've been feeling right now. Cause we've, I think we've gone past the point where anyone rational is disagreeing with the financial argument I'm making. Like I think that that, that ship has sailed, but no one really wants to accept what it means. And it's like, the thing that I don't get with Nvidia as well is when you talk to people about this and you're like, Hey, so like half or more of their revenue comes from five companies. Out of those companies, half of them to three-quarters of them require debt to buy the GPUs. Ten-year treasuries are skyrocketing, which means the cost of borrowing for everyone is going more expensive. At some point, Nvidia's revenue has to drop. And people respond by saying, yeah, but

you know, things were okay after the dot-com bubble. It's like, okay, but what happened during that? Yeah. What happened during?

After is a pretty long window.

Yeah.

Yeah, you've got about 26 years, give or take, I guess, a year for the after the dot-com bubble.

Yeah, and also, I just don't think that that really applies here, because instead of dark fiber, we have GPUs that, as I've established, are not getting installed. Right.

I mean, so this is, I think, for me, at this point, one of the biggest questions is just like, We've been talking about this, but it's the, where are the GPUs?

Right.

And everyone would love to have that story. And I don't think at this point, I mean, let me know what you think on the reporting side, but I don't think someone figures out this like, oh, what warehouse or what warehouses realistically are GPUs sitting in unused unless someone internal comes out and says it. Like, hey, I'm a forklift driver, you know, at XYZ Warehousing.

Yeah.

And we have 1800 GB or whatever GPU, you know, servers here. Cause otherwise I just, I would think all that stuff is so close to the chest that you're not, you're not going to have a leak from the executive circle and the, the companies that are warehousing it. It's also not clear to me. So if Microsoft buys a ton of GPUs and then you have Satya Nadella who actually said on camera that, that he has more GPUs than he has, quote, warm shells, and a quote that he can plug them into, right? Like, we know they have more GPUs than they're using. He said that. What I don't know is where do those GPUs sit in that purgatory?

Yeah, are they in a data center but without power? That wouldn't make sense, though, because if the data center didn't have power, that would actually be dangerous for them.

Yeah, and he also did say warm shells, which to me, in your situation there, I think the only way that happens... while his warm shell statement is true, is if it's a data center that doesn't have power yet. And I just don't see that happening, you know, like, cause then you're probably, you're not even permitted. Right.

So it's just, and again, you go to the various journalists about this and you try and make them talk about it and they go, ah, you know, it really is. This is actually what jokifies me. It's when you try and talk to your peers and they're like, ah, yeah, you know, it's bad, I guess, but who's to say.

And it's just like, okay, but we've sold possibly 200, $ 300 billion worth of GPUs that have gone nowhere and they're planning to buy more. This alone is a story. And they look at you like you're reading algebra to a dog. Yeah.

I mean, it's like, I feel like a product physically exists probably.

I hope so. Legally speaking. Like if it doesn't, and this is just literally balance sheet transfers, that's so bad. Right.

I mean, that's how I feel too. It's like, I think there's a certain level of awareness and I don't, everybody is, people aren't stupid, I think. And it seems unlikely that it would be a pure balance sheet type of.

Uh algebra i think that they just have a if i had to guess they're sitting in warehouses in taiwan yeah they just that they get manufactured and they just get stored somewhere and that's like we're never seeing those things and i mean i was i reported with the guardians uh i should down about this but they're uh microsoft as of a few months ago only had less than two gigawatts worth of AI capacity online. And most of that was H100s and H200s, like the vast majority of it. And it's like, people don't realize how bad that is because it means that most of the Blackwell sold in 2025 have gone nowhere. It means that any of the chips sold this year have gone nowhere. Bryce Elder at the FT report the other day that there

was an analyst who said that 50% of the chips sold this year and next year have nowhere to go. And it's, so it's like, why, I mean, why are we doing this is probably the biggest question right now. And no one really wants to talk about it.

Well, you know, on the consumer side, there's something really interesting. Um, I, we're working on a story on this, which, uh, I can, I can basically, I mean, I can share it in advance, but, um, we got an email from someone about a, you're familiar with micro center, big retailers.

Yeah.

So for anyone who doesn't know, micro center is a gigantic retailer, computer parts. Gigantic, I guess, in a relative sense. For the computer parts world, they're big. And they have, and we've confirmed, started using forms for customers buying 5090s, which is NVIDIA's flagship consumer GPU, sort of. It's kind of workstation prosumer consumer. So these forms... They ask the staff to obtain from the customer things like a government-issued ID to prove who they are. The purchaser, the customer walking into the store buying this GPU or desktops containing it, have to certify that they're the end user, or if it's for someone else, that they've obtained certification from that end user, that this device is not being exported, not

being resold, and everything. is in full compliance with the covered list and export control laws. And this is a microcenter specific thing right now. You go on Amazon and buy a 5090 or Newegg, they don't make you fill out a form like this. So it's microcenter specific for at least the time being. But it's interesting to me, I guess, because we're now in a situation where 5090s, which were launched as a consumer part, that's been hard to get because all the silicon is being taken for these data center parts that are probably sitting in a warehouse, that part is now so difficult to obtain that you have to potentially provide government ID and certifications in order to buy it. Like a credit card isn't enough. Which

is wild to me.

I mean, I get it. And what is this to do? Is this to stop the sneaky Chinese from taking it?

I think that's probably the sort of the build usage of it, you know?

Is that really what China is doing to get these GPUs? No. Feels like slapping a band-aid on the side of the Titanic as it sinks upon the ocean.

Well, I mean, NVIDIA had one of its own people... detained in Taiwan, implicated in smuggling, right? Not long ago.

Well, there's more smuggling stuff that came out today that I've yet to even fucking read.

Yeah, I saw the headlines.

Because there's more shit going on. But it is really funny, though. I'm paraphrasing the Bloomberg headline about it, but it was... NVIDIA's overseas sales of... Oh, sorry. NVIDIA GPUs getting to China shows holes in due diligence. Right. Not like, hey, has NVIDIA known that this is happening? Which is very...

obvious by now like he's there was the bloomberg story from end of last year where there was a picture of him with the ceo of a singaporean data center company that was sending the chips to china like having drinks with her at a big party right like it was like a professionally taken photo and people were like yeah you know it's still an open question.

Are you just referencing bloomberg repeatedly to hurt me ed No, no, no.

I'm referencing it because the Times, usually their biggest business is threatening to sue you for using videos of Donald Trump, I realize. But on their off time, they do journalism sometimes. Right.

Okay, got it. Yeah, I wasn't sure.

I feel really bad as well because the legal side is different. But... Nevertheless, that was a bullshit. But it is funny, though, how... There we go. That's the second one. It's like another thing that no one really wants to talk about. First of all, it's, hey, the data centers aren't really getting built, like they say, and the chips aren't being put in them. And the second is, NVIDIA is 100% aware that they're getting these chips to China and doesn't appear to be doing anything or, alternatively, might want it to?

I think that's the one sort of asterisk I have on that form from Micro Center. I emailed them. They didn't respond, but I emailed them to ask, did Micro Center decide to implement this form, or did NVIDIA apply pressure and say, you need to do this? Maybe the government traced a serial number of a device back to Micro Center's supply or something, or did the government ask you to do this form? They haven't answered me, but in the case of NVIDIA, I don't know. Maybe there's like a, look, we're trying. Here's this piece of paper we're making a physical retailer use, right? Yeah. But ultimately, though, yeah, I don't know where the GPUs are going. What I do know is that a big component of the GPUs,

the memory, has gotten into even worse shape since the last time we spoke, which is these three gigabyte higher density modules.

What was this?

So the memory supply for GPU VRAM, like GDDR7, has continued to worsen from a pricing standpoint, where the There's two kind of main types of modules that NVIDIA uses right now in consumer cards, which I kind of hesitate on consumer every time now because the 5090 is really, it's been bought up by a lot of sort of home AI type of people. But they've got a higher density three gigabyte module. You'll find those on the RTX 6000 Pro, which has just doubled in price from $ 8, 500 to $ 16, 000 from NVIDIA directly. And then there's lower two gigabyte density modules. And so the pricing has gone up.

and availability has gone down on the higher density modules where you really only have sort of three main suppliers for them. And if you look at Micron's margin on its memory now, I don't know if you saw that the other day.

Did it go? I actually saw it was higher.

I think it's 88%. It's about 90% margin on consumer memory.

Well, I'm glad Micron is doing okay.

Oh, I was worried about them. I just feel bad for them.

Aren't they also taking billions in taxpayer subsidies as well?

Yeah, but who doesn't do that? Good.

Good. Well, I'm glad that we attack people for doing dodgy things on their taxes. But I mean people strictly, not companies. Companies must be able to do that. Companies need as many loopholes as possible. This is all me queuing up. Did you hear about the Meta story?

Oh, no. Is it good?

It's not. Meta has been using the R & D tax credit to try and take billions of dollars worth of data centers off of their taxes, basically a tax rebate, by saying that they are an R & D expense for a project that may fail.

Oh, wow. No, I didn't hear about this.

New York Times put this out this week. It's just... Again, how many dodgy things need to happen for people to be like, okay, maybe this is dodgy, maybe this is bad. Because even the microcentre thing, sure those things are getting bought up by, like, whoever. They're getting bought up by whatever... whatever little ai perverts might buy them and theoretically the chinese could get them i don't know but we have a real way the chinese are getting these chips like it's happening it's probably through malaysia or singapore or there's another.

Country taiwan macau singapore yeah are pretty common ports of ingress and yeah there's a whole question too of like is there even any point to try and export control or i don't know i i when we talked about it back last year, the conclusion I came to was, I'm not really sure, I don't feel qualified to judge if there should or shouldn't be a law on it.

But what I do feel is fair to say is, if we're going to have them, they should make sense and probably be actually enforced. Otherwise, what's the point? And yeah, it seems like we've got kind of sort of a lack of follow through, you know, at either the government level or a lack of enforcement at the company level.

Yeah, I mean, also, the question, this is JustDario, a great, great friend of mine who writes, has the single worst, like, I love the guy, he's one of my favorite people, has the single worst design blog I've ever seen, but he now moves stuff off of him. So many ads, it's truly crazy. But the thing that he's done very well is he's been looking at NVIDIA very intensely, and Kakashi and other guys have been doing this as well, where it's the way that nvidia has changed how it puts in its sales how it counts where something was going it used to be it'd say oh yeah 10% of I'm pulling a random number 10% of our sales went to Singapore but what they changed a few quarters ago was it's now the event the HQ of the

company buying them oh yeah that's so it's like oh yeah like 90% of our sales go to America and as we all know it's really hard to start an LLC.

Right, yeah. It's nearly impossible. It's about $ 200.

It's millions of dollars. It's not $ 100 and five minutes. There are multiple companies that do this immediately. And it's just funny because if it turns out a sizable amount of this money is coming from China, which I don't know how much it would be, that will eventually go away once China just copies America and stopping doing the AI bubble, or when they truly move to their own chips.

But at the same time, It doesn't seem like China has any trouble getting them.

You know, not only that, but I also, I've had a, I've seen a lot of the Anthropic and these other LLM company, model company posts where they complain about how they, well, at least according to them, their models are being stolen. And they'll always point to China and the companies in China as stealing their models. And which is just like what people have always said forever. about manufacturing coming out of China in terms of sort of the, it's, it's like the scapegoat of, that's just what people point to is copycat. But the truth of the matter is these days, there's a lot of really good engineering coming out of China.

Yeah.

But what's interesting to me is how these LLM companies, they, they still draw upon this old image, uh, of China and its sourcing for what it it's IP, I guess. And these are companies like Anthropic and, you know, OpenAI and Meta who are in the business of stealing everything made by anybody ever. And they then have the gall to point at literally any other company and say, you're reverse engineering or stealing our IP. I just, I have a really hard time reconciling why I should feel bad.

Like take the China and the US and the whatever out of it, right? Take all the geopolitics out. Why should I feel bad? If a company that has ingested all these authors and musicians and everyone else's work then feels like their IP for their LLM has been infringed upon by a competitor. You know, it's like, make me care.

Well, also, the other thing is, I think there's also a fairly large layer of xenophobia to it. I also think, paraphrasing my girlfriend here. America misses the USSR so bad. Oh, we miss having an argument with Russia. Oh, we don't have an adversary anymore. We miss having an adversary so much we started shit with Iran, who is dabbing on America on Twitter, which is embarrassing for everyone. But this distillation thing. And so, Steve, I assume what you mean is like the models, like Chinese models training off of outputs from ChatGPT and Claude, right?

That's what they claim, yeah.

Yeah. So here's two things with this. One, you're completely right. Who gives a fuck? Oh, suddenly the stealing machine doesn't like when it's stolen from? What are you going to do about it, bitch? Why don't you distill from other people? It isn't theft. It's ridiculous. And it's so silly as well because their argument is, well, it's our models that created the outputs and thus we own them. It's like, okay, well, who created the shit you trained on?

Right.

Did it pop out of the fucking air?

I mean, if I break into someone's house... and I do them a favor and steal their LG television, and then a different thief steals that from me, I feel like it's kind of hard for me to cry about it as the original thief.

Yeah, I mean, well, the answer would be both of you would be criminals, but one would be the funnier criminal.

Right.

There was a level of funniness to it. But there's also another thing that no one really can quantify yet, which is how much of their revenue is a result of distillation? Because Anthropic in their S1 that leaked this week, or sorry, last week even, is they're saying that like 20% of their revenue or something comes from overseas. And I mean, some of that might be Australia. Apparently, they have a huge Australian, I don't know why, Australian listeners. If you have any information, please email me, easy at betteroffline.com or EZ for those of you in Australia. But the other thing is, is I wouldn't be surprised if like hundreds of millions or billions of dollars came from the distillation.

And if that's the case, they kind of need this to continue. I will also argue that if it must be quite a large share, in which case, how can they not tell? And if the answer is the Chinese are too sneaky, well, sounds like they're out innovating you. Sounds like you're terrified of them out innovating you. Why don't you, I don't know, why don't you distill off of their models? In fact, that just occurred to me.

Why don't they distill off those models or their own models and make cheaper models, right? Surely they could. It's almost... See, there's a problem. What's the problem?

Well, you just said the word cheaper.

Oh, right.

My bad. Yeah, no, that's the wrong direction. We don't do that here.

Yeah. Well, and now also... So have you really looked into Broadcom at all? You had a look at... I can.

I'm afraid of why you're bringing them up specifically right now. Well.

The reason I'm bringing them up, I'd be looking forward to talking to you about this actually, is Broadcom is currently doing an NVIDIA impression. They're really desperate to do NVIDIA style. So what they are doing is they have now, so Anthropix S1, they have $ 413 billion worth of uncancellable commitments, which is very good for a company that had $ 4. 8 billion in revenue.

Sorry, $ 4.

6 billion last year and lost $ 8 billion. Now, $ 161. 2 billion of that is to Broadcom. Broadcom, their largest customers are now Anthropic and Google, both for TPUs, all of them mostly going to Anthropic. And also OpenAI's jalapeno chip. The less we think about that or say that, the better. So right now, Hoctan of Broadcom is actually raising $ 60 billion more to just keep doing more of this. And so we have this, another pressure on the overall business ram market more demands of the hb ram market because of fucking broadcom right they and so it's weird as well because broadcom doesn't really have they don't have any consumer gear so you'd think that this would work out better for them but their margins are worse they don't

have the supply chain that nvidia has they have a supply chain they're pretty good at enterprise chips but they are still nowhere near as proficient at it as nvidia which is interesting in and of itself but i think we're going to see Hawk Tan try and race Jensen Huang to be the biggest chip company, which is hilarious because they won't do it. They'll be potentially dead by then.

But it's just interesting watching the semiconductor industry kind of eat itself at this point.

I do wonder who's left standing at the end. You know, if there, or when, if or when there's some kind of collapse, if we just kind of go full doomsday and assume it's It's a sort of a catastrophic collapse at some point where maybe one domino falls and then, you know, a bunch of other ones do. I genuinely don't know who is in the strongest position to remain standing.

I feel like NVIDIA is probably in one of the stronger positions.

They'll be okay. It would just be 90% smaller. Right. Yeah.

And that's crazy, too, because, I mean, if you look at their revenue just, whatever, four or five years ago, I guess, right?

It's like.

a fraction of a fraction of what it is today, and most of it was still gaming. So I'm not sure. I really, I don't know. I wish I could say that my hope would be in the event of some kind of drawback of this B2B stuff, if the companies have to go crawling back to consumers, I would hope that consumers would try to not buy from them as a means of you know like fuck you for what you've done to our industry but unfortunately your options are in the gpu space nvidia intel which nvidia it's like four or five percent of and uh and and intel's barely present there and amd which hasn't really done a whole lot to garner much sympathy itself and so it just feels like we're kind of Like, who do you give your money to? I guess Lee Swan coming out

of China or maybe someone else, but there's not really any... It's those three, you know?

Well, the other thing that I've been thinking about with the gaming GPUs, which it sounds like they no longer... NVIDIA no longer discloses on its earnings, which is.

They group it in with edge computing, yeah. So it's all rolled in.

Fucking Jesus Christ.

And the edge computing category, if I remember correctly from our coverage of it, is not even enough revenue to kind of equate the tax bill that Nvidia has. That's kind of how small it is now. And that contains gaming, right? And AMD, their gaming was still broken out in one of the previous reports recently, and they had seen something like a 30% decline in that category, which makes sense.

But here's the thing that I've been really thinking about. Which is, okay, let's say AI bubble bursts. I'm sure that's going to happen. NVIDIA and AMD haven't really been working on gaming very much the last few years. Like, no one, really. It feels like the entire intelligence of these companies has been focused on building chips that can sit in warehouses and can benchmark. Which makes me wonder, like, what happens to gaming after this?

I think the good news is in terms of, like, playing video games as a fun thing to do, it's doing great. You look at Steam's numbers. Steam's a private company. They're a big digital platform for people who don't know for games purchasing. And they're... they're doing more like better revenue than ever from some of the reports that have come out. But I think a lot of it's going towards indie as an independent games these days, as opposed to the big studios. And what that tends to mean, although not always, is that things like the graphics fidelity or the demand on the system are lower because they're more focused on just getting a fun game that's playable out, not necessarily these sort of like GPU melting graphics. And

for the GPU companies, that's uninteresting, unfortunately.

Right?

Because they can't sell more GPUs. Why are you making a game that's fun when you could make a game that sells graphics cards? Is, I think, their perspective.

But the thing is, I'm just, gaming at this point is reaching its own kind of bubble status where games either cost $ 100 or $ 1 billion to develop. I'm being dramatic, but you get my point.

It's not too far off.

And everything is, it's so expensive to buy a new console and everyone's very unhappy. Like Xbox, Microsoft looks like they might, but I don't know if they'll set it off, but it's no longer a foregone conclusion that they'll keep it. And there's rumors about Xbox Game Pass, which was obviously a bad idea being rolled back. Like, what a surprise.

Selling hundreds of games for $ 30 a month wasn't a good idea. Kind of like streaming media except dumber. And it just feels like gaming is kind of accelerating to this point where it will have its own financial– like, I mean– As Nvidia AI bubble ends, AMD, same deal. They have to go back to pleasing gamers at a time when inflation is high and the prices are high and no one can really afford anything. What the fuck are they meant to do? I just don't see how it works.

I mean, I think, yeah, to your point, I think in that situation, sort of normal people, as in customers, are probably the last people you're going to shake money out of. if times are tough and they're worried about losing their jobs, like it might actually be better to try and stick with the sort of B2B and just hope that you can scrap together enough.

I don't think there's going to be a B2B left. I will say, this is my most dramatic statement I'll make on this episode. I think the Steam machine is a better console than the Xbox or PlayStation 5. perhaps the playstation 5 has better they may have better games but and maybe the performance is better but as far as the experience of using the fucking thing to play video games i like the controller better i like the experience better.

That's cool i mean i can i i like hearing opinions like that because it's it is like people lose sight of the fact that consoles although you can compare the performance. And the Steam Machine's basically a console, though it's a computer.

It's also, like, thrice the cost of a PlayStation 5. The economics are fucked.

Yeah, these days, though, I mean, the PS5, if you buy it with a disk drive now, which is a whole separate topic.

Oh, yeah, it's like $ 7 million.

Yeah, they're over $ 1, 000. Jesus Christ. Yeah, actually. So, like, weirdly for the Steam Machine, their competition's kind of getting closer to them.

And, uh....

Yeah, I do think it's interesting, though. I think if you look at where gaming's gone with the lack of the super high-fidelity graphics and towards more of these more playable, more fun games, stuff like the Steam Machine or consoles are better positioned for it because you don't need the crazy graphics. But on the game bubble you mentioned, I don't know if it may be interesting for your people who watch from the financial industry side, but on the gaming side, A lot of these big studios really are struggling now. I mean, Epic Games is not far away from me. I've heard a lot of sort of talk and rumors from people who work there about– and this relates actually to AI– about the internal push to use

AI and to add it to sort of the job requirements for people working there. Jesus Christ. Yeah. And so, you know, this is– Tim Sweeney.

Yeah. Tim Sweeney.

Did you know– I haven't shared this yet with anyone publicly. Please, please. This is an exclusive.

Oh, yeah.

Did you know that Tim Sweeney has blocked the Gamers Nexus Twitter account?

No! No! What a coward!

Oh, it's one of my great honors. I need to print that out and frame it.

Was that because you kept asking him for an interview?

Yes, and I may have... It's because he kept beating the drum about AI... and how you shouldn't need to disclose if a game has AI in it or AI art or assets, which is something that Steam has required. And he didn't like that because they're invested in AI at Epic. And I repeatedly offered an interview, and I may have in my last round said something to the effect of, Look, I know the town revoked your zoning for the mall that you bulldozed to put your new offices on, but we could do an interview there. Although I suppose the backdrop of gravel and needles is probably not a good backdrop. And then he blocked me.

How would he block you? Why? I just can't look at it. Yeah. It's like when CZ from Binance blocked me after three months. Yeah. Well, it's like I kept posting the smiling man image. underneath everything he said.

He blocked you? Wow, congratulations.

That is awesome. Famous actual criminal.

That's actually really cool that he blocked you. You should put that on your awards and accolades section.

Yeah, you get people boasting about Marc Andreessen blocking them, that's super easy. No, you need to get actual, you need the big criminals. But as we wrap up, I actually did want to ask you about something positive. The Steam frame, the VR headset. Can you tell me about, like, it's something where I have actually not had a ton of time. Like, my mate Casey just got it, but I haven't had a ton of time to look into it.

What's it like? It's cool. It's like a fun thing to talk about.

Yeah, I mean, VR, it continues to sort of have the chicken or the egg challenge, which is just getting enough distribution where developers want to develop for it. But it has matured a lot in the 10 or so years I've been covering the headsets these days. The Steam Frame is expensive with sort of an asterisk I'll come back to. But one of the things it does really well is comfort, where they've kind of finally made a headset that, for some of the people on the team, they find just comfortable out of the box without needing to buy a third-party strap to attach it. And so VR has gotten more approachable, I think, no matter what you buy. for everyday people where it's no longer this big mess of like a rat's nest of wires you

have to plug in to use. And so it's, it's, it's pretty fun. The thing that I thought was the most interesting with the steam frame versus its biggest competitor, which is meta's quest is the steam frame, although more expensive, their privacy policy was very clear. Like they straight up told us, no, we do not sell or, share data for marketing and advertising, like third-party ad purposes, and all of the room scanning data. You know, these VR headsets now, they have cameras on them, they have microphones in them.

You have to scan or look around your room to use it. And Valve was very clear with us where they said all of that stays local to the headset for purposes of, you know, processing where you're standing in your house for playing VR games. Whereas Meta, if you read their privacy policies, which are like, recursive and nested and tens and tens of thousands of words, they have all kinds of terrifying clauses about the data that they extract and send, you know, exfiltrate back home for who knows what, being a big AI company. So on the positive side, I thought it was really cool. It was like, okay, you say what you want about Valve's pricing or about VR in general, but the fact that they have this thing with cameras and microphones and they're choosing... to not

sell data that they can collect with those, that's so rare these days.

Yeah, it gets back to the thing I said about the Steam machine. One of the things I like about the Steam machine is that it has a list of my games on it and some games I might like to buy, and it doesn't have an ad for a fucking FX show. It doesn't have Tracker featuring Tracker, the guy who tracks things, or an ad for Diet Pepsi or whatever. I don't have to go through... It's not even trying to advertise me A new game. It's just like, hey, man, you were playing this. You want to play this? Here is, in a small bar at the bottom, some other things you might like, but you should play the thing you want to versus the Xbox. The PlayStation 5 is better, but the Xbox is a fucking nightmare. It reminds me

of the epicenter in Charlotte, North Carolina. Just this big blaring thing, and you can't find North Carolina references. around here. But you can't find what you want and it's really loud and it sucks. That is the Xbox now.

Well, have you seen Microsoft's newest patent?

What'd they patent?

They patented the technology to identify the least intrusive times to inject advertising into video games and media that people and the programs it's not just games it could be it could be excel for all you know where it's like or quickbooks hey you want to complete that general journal entry you have to watch this ad first so that that was kind of the newest patent.

Oh god i it truly is it's such a depressing state where i pretty much it's actually great say i think valve might have a meaningful chance of dethroning the xbox like there's It's crazy to say that.

Yeah, there's a lot of money behind that.

And I used to be a big Xbox head. I used to really, I used the, I love the Duke. I think the Duke is a great controller for those listening who don't remember the Xbox, the first Xbox. Not called the Xbox One, that was a later one.

You're talking the original controller.

The big one. The original one. Had just this chunky motherfucker of a controller, and it is so satisfying. It's just like a big... If you used one to defend yourself, it would take a knife. Not really, you shouldn't try that. And then the Xbox 360 was great. And then each one got slightly worse. And now we're at this point when the Xbox One X is just a shittier PC.

I mean, just their branding is a mess. They went from Xbox to Xbox 360, Xbox One, Xbox Series.

Series X, Xbox One X. And I mean, I kind of, Asha Sharma, I kind of feel for her in that she's just being dropped in a post-frat party house with a tiny brush and they're like, clean it the fuck up, woman. Go. Go fix it.

Do you think she is being put in... As, like, an axe person. You know how sometimes the companies will put in a new executive to kind of clean house, and then that person's the bad person, you know, and they get them out?

Yeah. I think that there's a... I think it might be that, but she's not really agreeing with it. Okay, yeah. Because she seems to be doing these interviews... The thing is, if she's doing these interviews, and she's saying, oh, I want to make Xbox good, I'm jumping in customer service calls to make it good, and she's just fucking lying, then...

Jesus Christ, what a monster. But I think she might be put there as a means of chopping things off, but also not wanting to. But also trying to fix it. Yeah, I just watched Margin Call again last night, which I really recommend, and there's a bit in it where Jeremy Irons turns to- Demi Moore goes, I'd really appreciate it if you didn't fight me on this, as he tries to leave everything at her doorstep. I think that may be it with Satya Nadella. I also think that there is a certain degree of having a very public face of something going wrong with Microsoft that they can point at and make everyone focus on. As the AI bubble falls apart, has some use too. But I think that people will also say, oh, that's a, really smart move. Now,

it probably feels smart to them, but it's actually a terrible idea because what's more than likely going to happen is this Xbox collapse, which is inevitable at this point, they're going to have to start laying even more people off, is going to happen around the time of either before or after the AI bubble. So it will be Microsoft getting two hits at once.

And I.

It's also, but this is kind of the acceleration of the problem with the game industry, that every console has to get more expensive because of memory. Every AAA game has to be twice or thrice as expensive. Every game can't just be a video game that you buy once. It has to be a live service game. Right, yeah.

Where you buy fucking, what is it, that Madison Beer, Justin Herbert's girlfriend. You can play as her in Forknife or whatever. It's like every single game has to be plus plus go on for 15 years like destiny i mean oh that's a whole other thing.

I think it's it's the we we're at peak extraction of money from consumers you know like some of these sony and microsoft have at various points in recent years talked about how uh they start seeing a plateau on their user base and so it's time to get more money per user right and so yeah we're sort of And I think we've hit the point where consumers obviously have had enough and it's just, okay, you're no longer providing me this super convenient, I can watch movies from the internet.

Cool.

Thank you. I'll give you $ 5 a month. We're way past that.

And they don't want to compete for your money. They don't want to do more useful things. They just want to turn the screws on you more. It's genuinely sad as well, because gaming is one of the few things that I have replicably enjoyed in my life, along with music.

It's a real escape.

And it's also just the games I've enjoyed the most have not been AAA for years. Like Slay the Spire 2, the raccoon coin game I play. I'm not sure if anyone's familiar with that one. It's a coin machine where you have a raccoon. It's by the Bellatro people. Bellatro, another fun game. And I can't, I don't remember the last time I played a a triple a game and really stayed into it i borrowed a copy which won't be able to do in the next few years of the of the new james bond game mostly because the bloke kind of looks like me and i quit five.

Minutes jensen jensen said that he looks like him.

Wait what james bond in in the new james bond game first light he looks exactly like me.

He said Jensen said on stage.

It looks like him. Well, he's not Asian, so that's the biggest.

He said he sort of looks like me. I think it's because he had a leather jacket on.

Okay, Jensen. It's kind of like the tweet where it's like the guy who's only seen Boss Baby. Oh, this is giving me real Jensen Huang vibes. But I played five minutes of it. And the reason I stopped is it begins with a helicopter crash and you were injured. And so you have to slowly shuffle along a beach.

And it's just this prestige dog shit. These prestige games. I'm sure you've seen clips of Wolverine.

Yeah, it looks painful to play.

Ah I'm surrounded by guys I better hit R3 and L3 to activate Wolverine mode it's just every AAA game is like that now to the point that oh I don't want to fucking get involved even if it looks fun I'm going to have to struggle through the cut scenes and the weird prestige bollocks and it also costs them a bazillion dollars like Wolverine costs hundreds of millions of dollars how do you fuck up a Wolverine game man.

I don't know it's like the most straightforward superhero game you could do.

Well, it's just, it's kind of bleak, but I do think there is an opportunity for PC gaming to somehow come out the winner, though.

I think so. I mean, I think with the smaller development scene, and unfortunately, it's just with the shortage of components now, man, yeah, the companies in the space for PC DIY are hurting, and I think a lot of them are... I think what's going to happen is these companies won't be able to really truly survive, but you'll see the brand persist as sort of a shell of itself to continue moving through whatever inventory is still in warehouses, because to truly close would be to signal to your distribution and retail partners that they need to stop buying whatever's left. And a lot of that's because people can't, it's not because necessarily the cases of coolers are bad, it's because If a stick of RAM is $ 250 for

half of what you want, then it's just not viable to build a computer.

Well, with that happy note, I'm going to end it there. Steve, what are you working on now you want to hype? What's coming up down the pike?

Now we're working on even more of the smart TVs, actually, after our LG one. So, it turns out... Yeah, I mean, there's... There's some pretty concerning stuff still with LG that we'll talk about at some point. And right now, one of the things I'm playing around with is connecting the profiles of smart appliances. So if you have a smart refrigerator and a smart TV, connecting those devices to then monitor...

How well does the advertising platform know when I've like depleted my supply of Red Bull in the fridge to then start shoveling Red Bull ads in front of me on a TV?

Hmm. Well, tech industry sucks. You heard it here first. This has been better offline. I'm super happy now. Thank you so much for joining me. Steve will have those links in the episode notes and everyone will be back with the monologue. Thank you. Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Osowski. You can check out more of his music and audio projects at mattosowski.com. M-A-T-T-O-S-O-W-S-K-I dot com.

You can email me at ez 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.wheresyoured.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 podcasts or wherever you get your podcasts

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