Circular AI Deals Raise Bubble Concerns

Deals

Major AI companies have invested billions in each other, raising concerns about a bubble and circular financing in the AI industry.

Context

During the late 1990s, technology companies engaged in circular deals where they invested in and bought from each other, artificially inflating demand until the dot-com bubble burst in 2000. The Nasdaq fell 77% and took 15 years to recover to its previous highs. Unlike that era, however, today’s AI companies are backed by highly profitable businesses with strong cash flows.

Deal Network

OpenAI and Nvidia recently announced deals worth hundreds of billions of dollars, but analysts warn that the arrangements echo patterns seen before the dot-com crash. These deals form a complex web of financial relationships among AI’s biggest players.

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