We’re already seeing revolutions elsewhere — and it’s likely that trying to loot them further by generations who sold out the nation will simply lead to social collapse.
A pack of 3 oldies burst through our perimeter one winter night... the screaming woke me up. Outside my tent the forest was lit up red by our laser blasts, trying desparately to take them out.
We thought that a revolution would be a good idea, but an upside-down population pyramid is a hell of a thing when you're on the bottom.
Very simple example, and not the only way to do it - but people need to remember net worth being 500B is not 500B in the bank, and at some point the number doesnt matter
Just using Google / Gold as a comparison [1].
Assume you have 100 units of each.
In late 2021, Googs gone up ~100% so you have to rebalance because you have $200 in Goog and $92 in Gold. So lets say you rebalance to 80 Goog (160$) and 144 Gold ($130).
In late 2022, Googs gone down ~40% so you have to rebalance because you have $96 in Goog and $141 in Gold. So lets say you rebalance to 100 Goog ($120) and 118 Gold ($112).
So over the course of 2 years Goog has gone up 20% and Golds gown down 5% but your investments are overall up 16%. Obviously a 100% Goog investment is higher but with more risk.
If you didn't do any rebalancing then you have a gain of 7.5% (100*1.2 + 100*0.95 = 215)
[1]: https://www.google.com/finance/beta/quote/PHYS:TSE?compariso...
Only if those are the only actual real customers. It's not. The pie is a lot bigger. And with the current hype some other AI company will just take over and the bubble will continue.
Inflation on the other hand definitely does reallocate real value to whoever already owns a lot of assets, and I believe inflation often goes along with bubbles, since credit expansion is what usually kicks off the bubble in the first place.
When the fed investigates this does it matter if one of the 3 companies is not a publicly traded company?
The issue is that it's an industry of investment which exists solely to power more investment in AI - the entire chain is still assuming that someone will eventually pay for this.
At the end of the day all that money leaks out to employees and suppliers...but no one those people transact with may have any interest in buying what was produced.
It's entirely based on the perception that LLM training & inference is here to stay at ever growing scales when the shortcomings of Artificial Dreaming are increasingly scrutinized. Not all businesses want to end up paying refunds to their clients like Deloitte [1] because the LLM hallucinated crap into their reports (and they failed to correct it).
[1] https://www.theguardian.com/australia-news/2025/oct/06/deloi...
This assumes Deloitte didn't make more $$$ from the deal by "outsourcing" it to AI than not. It was a partial refund.
And you haven't considered that Deloitte might get this money some other way anyway. It's been budgeted and needs to be spent by the government department for this financial year. They'll find another project to hand out.
I used it to learn terraform and have a kubernetes cluster running.
I know it's always trendy to bash oracle and simp for AWS, but it is THE best option for learning and hobbyists.
Can you get that without adding a payment mechanism? For some reason, I'd be more cautious about putting my card into Oracle's offering than anyone else.
No!
There are actually two free tiers.
The limited free tier you get without adding a CC and then this advanced "always free" tier I am using, where you have to use and verify a CC and have to pay big bucks if you mess up.
limited free tier: 300$ to be spent in 30 days
advanced always free tier: https://docs.oracle.com/en-us/iaas/Content/FreeTier/freetier...
The big limitation is the 10mbit egress bandwidth, but you can work around that with (free) Cloudflare.
Learning terraform isn't hard, it's what you stitch together with terraform that is hard.
In terms of actual earnings not sure Tesla is doing better.
What's he going to do with all that money, and what does he care for the risk it's bad or shady?
Worst case, he got to be #1 for a bit for a few dozen billion, best case he's hoping AGI will extend his life before he croaks.
As a more serious point related to this though, I was under the impression that organ replacement didn't address issues with telomere length?
The thing that unites Ellison, Trump, Musk, Thiel and a fair few of the other politically active billionaires is the obsession with "legacy" - they want to leave their mark in the history books, figures which will likely be remembered and taught in schools in thousands of years similar to Roman emperors.
Musk is the most obvious with his obsession of settling (and eventually dying) on Mars, Trump is dreaming of getting a Nobel Peace Prize (if only to not let Obama be the only US President who got one), and the rest is hunting for the "invented AGI" crown.
The implied equity risky premium is getting pretty low - a sign of greed.
>By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"
The real problem seemed to be that you can only put so much money into pets.com before it becomes stupid. You had more short term investment capital than could be _effectively_ spent at the time. The long term players, as usual, avoided the Archimedian idealism, and were heavily rewarded anyways.
pg has startup brains.
That means: 1) Late investors end up taking a bath because it will actually take 10x longer to get a return than they thought. 2) Investment becomes inefficient - there are lot of GPUs being bought in 2025 that should have been bought in 2030. By the time 2030 comes along, those 2025 GPUs will be outdated, so the value they will provide will be less than if they had been purchased at the correct time
I don't get this. Of course there was. Specifically, March 10, 2000.
To declare that something is not worth investing in doesn't imply that it's useless. (and actually, swing investors will argue something can be worth investing in even though it is in fact useless, e.g. web3 and most crypto).
Words have meaning in context, and calling something a "Ponzi scheme" these days means any pyramid-like system that only works as long as new investors come to the table, because that new investor money is the sole source of gains for earlier investors. But once you run out of new investors, which is inevitable, the whole thing collapses. What pg described was exactly a Ponzi scheme in that sense, even if it wasn't a deliberate scam. And that's very different from other types of business ventures that eventually fail because of the more "normal" reason that they just don't gain traction.
And you do recognize the context of those words was 15 years ago at this point?
> was exactly a Ponzi scheme in that sense, even if it wasn't a deliberate scam
There are better terms of art to describe the scenario. If we lacked for those words I might grant you this point, but since we don't, I find the description lacking in precision if not completely faulty.
> the more "normal" reason that they just don't gain traction.
Is that actually the "normal reason" most businesses fail? I'm not sure it is.
Language is fluid, and many of words got their very known & popular meanings later, when people used for things that it didn't exactly mean what it was initially intended to, and it got popular.
People are ever less empathetic and sociable, this being the reason for such comments.
In this case dotcom investing was so stupid that it should have been recognized as stupid at the time, without hindsight. For someone who lost money, gave bad advice etc. insisting that they didn't fall for a Ponzi scheme means representing themselves as less terrible investors, regardless of facts.
Though I guess with high velocity of money circulating in tight loops, everyone involved can feel rich. 1 million dollars changing hands once per day can potentially mint 365 'millionaires' during the course of a year. If they just pass it back and forth among themselves to buy each other's stocks and products and don't let that money escape their network to actually pay for something useful, they can all be millionaires... On paper.
Not to mention how relatively small amounts of money, moving at high velocity, can inflate asset prices... On Alice's birthday, Bob can buy 100 shares of Alice's shell company at a price of $10 per share. If Alice owns 1 million shares of the company (which she founded), it means that Alice's net worth is at least $10 million... It cost Bob only $1000 to give Alice a net worth of $10 million. Now imagine that same $1000 moving in and out of that company's stock, traded 1000 times per day between various people. With just $1000 circulating back-and-forth at high frequency (A.K.A. high-frequency trading), you can generate a trade volume of $1 million per day... So it all seems reasonable; a company with a $10 million valuation with $1 million daily trade volume... Nothing suspicious. So you can basically start a shell company and fake everything; from the market cap, to the trade volume; using only a relatively small amount of money. This is what they were doing in the early days of crypto.
The same money can hop around in circles between an insane number of people when it's just 'revenue' because revenue is not taxed (after expenses). Only profits are taxed... But the same money, as profit, can barely hop between 6 people before it's taxed down to just 10% of its original number. High-velocity revenue can severely distort people's perceptions of the market, especially in the era of media filter bubbles.
Under GAAP (normal accounting) A has a profit.
In reality are they profiting? Who knows - it depends how A does as a business.
It's crazy how all these small subtleties in definitions of various terms can create something so abominable in the aggregate. Makes one want to reach for a tinfoil hat. Not sure I can even trust the company which makes the tinfoil at this point.
You see companies hand waving this sort of thing away on earnings calls when they have a really bad quarter but the CEO is blowing smoke at shareholders saying “On non-GAAP this was an amazing corner.” Which is code speak for “that terrible decision I made a few quarters ago is coming home to roost and our lawyers have said I need to reflect that on our books. If you ignore where we screwed up badly, our numbers look good!”
Some people might interpret or represent the aforementioned transaction as justification for thinking Alice's net worth is at least $10M, but it is not an objective measure of Alice's purchasing power (as it would be in the case that Alice had $10M cash).
>The same money can hop around in circles between an insane number of people when it's just 'revenue' because revenue is not taxed (after expenses). Only profits are taxed
On the US federal level. Not sure about other countries, but quite a few other governments in the US do tax revenue.
https://taxfoundation.org/data/all/state/state-corporate-inc...
>Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead of corporate income taxes. Delaware, Oregon, and Tennessee impose gross receipts taxes in addition to their corporate income taxes. Some localities in Pennsylvania, Virginia, and West Virginia likewise impose gross receipts taxes, which are generally understood to be more economically harmful than corporate income taxes.
See also:
Strategically I thought OpenAI's deal of getting 10% of AMD for driving their stock price to $600 was a pretty clever way of creating $97 Billion from nothing - effectively paying for the GPUs they'd purchase.
At the same time I would've thought this insider pump and cash-in strategy would be somehow illegal, but I guess anything goes with this administration.
https://www.youtube.com/watch?v=Y4iBdIq0aaY
I think it serves as a good commentary.
I feel like that's the problem generally with late career Scorsese. The last of his films that felt consistently interesting and free of flab was, to me, Casino, though he got close for me with The Aviator and The Departed.
I haven't seen KOTFM b/c it's past my Scorsese Endpoint. ;)
They remind me of the story about the oil prospector in Warren Buffett's year-end 1985 letter to Berkshire Hathaway shareholders:
> An oil prospector, moving to his heavenly reward, was met by St. Peter with bad news. “You’re qualified for residence”, said St. Peter, “but, as you can see, the compound reserved for oil men is packed. There’s no way to squeeze you in.” After thinking a moment, the prospector asked if he might say just four words to the present occupants. That seemed harmless to St. Peter, so the prospector cupped his hands and yelled, “Oil discovered in hell.” Immediately the gate to the compound opened and all of the oil men marched out to head for the nether regions. Impressed, St. Peter invited the prospector to move in and make himself comfortable. The prospector paused. “No,” he said, “I think I’ll go along with the rest of the boys. There might be some truth to that rumor after all.”
Here's them 2 weeks ago being interviewed https://www.youtube.com/watch?v=jVBzsg3yCK4&t=40s
Also Brockman:
>And so, you really want every person to be able to have their own dedicated GPU, right? So, you're talking order of 10 billion GPUs we're going to need. This deal we're talking about, it's for millions of GPUs. Like, we're still three orders of magnitude off of where we need to be. So we're doing our best to provide compute availability, but we're heading to this world where the whole economy is powered by compute... (15 min in)
Is actually laughable.
I guess they figure once they have the users they'll monetize somehow but that bit's kind of iffy.
I agree with the idea but it is no certainty.
“We’re now locked into a particular version of the market and the future where all roads lead to big tech,” says Amba Kak, co-executive director of the AI Now Institute, which studies AI development and policy. Indeed, the success of major stock indexes—and perhaps your 401(k)—is resting on the continued growth of AI: Meta, Amazon, and the chipmakers Nvidia and Broadcom have accounted for 60 percent of the S&P 500’s returns this year."
If token usage declines because of high prices, look at what happened to SBF.
Unless you figure out how to talk in latent space directly to an llm the preamble is the cost you pay for getting the answer back in English.
SBF lacked funds to ride it out. If they survived for a bit longer, Bitcoin would have surged and they'd keep going. AMD, Nvidia etc all have income and funds to survive.
This is just about finances unless you're implying there's some crime here too.
Yes and then maybe he'd never have been arrested and jailed for all his crimes.
> OpenAI: We would like six gigawatts worth of your chips to do inference.
> AMD: Terrific. That will be $78 billion. How would you like to pay?
> OpenAI: Well, we were thinking that we would announce the deal, and that would add $78 billion to the value of your company, which should cover it.
> AMD: …
> OpenAI: …
> AMD: No I’m pretty sure you have to pay for the chips.
> OpenAI: Why?
> AMD: I dunno, just seems wrong not to.
> OpenAI: Okay. Why don’t we pay you cash for the value of the chips, and you give us back stock, and when we announce the deal the stock will go up and we’ll get our $78 billion back.
> AMD: Yeah I guess that works though I feel like we should get some of the value?
> OpenAI: Okay you can have half. You give us stock worth like $35 billion and you keep the rest.
https://www.bloomberg.com/opinion/newsletters/2025-10-06/ope...
OpenAI is good at deals - https://news.ycombinator.com/item?id=45493815 (40 comments)
> AMD: Oh, since you put it like that, why don't you pay us $x for the chips and give us $ 0.5 x worth of stock? When your market cap rises by $ 0.5 x you'll get the money for those stocks. And hell, it might even rise further, giving you back some of the money for those chips. You're really robbing me blind with this deal, you'd be a fool not to take it!
Matt's telling is a little facetious, so the exact negotiation probably didn't go like that. More importantly, OpenAI has better options. If they want to pay AMD cash for chips, they could do that without also giving up their equity. The same can't be said for AMD. They're the second choice when it comes to GPUs, and they're desperate for market share, so they're willing to cut deals like this. Without this deal OpenAI probably would have bought Nvidia chips with cash.
bought Nvidia chips with cash
> NVIDIA intends to invest up to $100 billion in OpenAI progressively as each gigawatt is deployed.
Replace AMD & OpenAI with some crypto company and Trump, hypothetically the latter doesn't really obviously get any significant benefit from the former's endorsement.
Now we are just transferring the power from bankers -> tech/AI.
It was the largest merger in history when completed with
the combined value of the companies at $360 billion.[0]
0 - https://en.wikipedia.org/wiki/AOL#2000%E2%80%932008:_As_AOL_...
As to the stock going up - we have a bit of a stock bubble thing going on.
From the OpenAI side, it’s an amazing deal. $35B profit in one day… at a pe of 30, it’s already worth a trillion if it can repeat similar deals every year.
I thought AMD is well positioned in the inference space? They have high VRAM, somewhat high connectivity, already shipping pods that are pretty ok for inference? Training is still dominated by nvda and their CUDA moat, but there's an increased need for scalable inference, and that should fit AMD well. Am I wrong in thinking that?
The bubble now isn't even about LLMs, but has affected the entire stack. Even hardware companies are offering rubbish for the sake of prop'ing up their own valuation.
CUDA had decades of improvements, we may have AGI (tm) earlier than what it will take AMD to fix their broken software.
MI450 doesn't work well at all, OpenAI would rather take the deal and overspend in a project to try to use it for their software stack, which is incompatible with it.
Just for the sake of proping up valuations, with no "market competitiveness" guidance. Just for moving money.
Funnily enough, Google is ahead of all of this, as they can make their on TPUs and have their integrated stack. They don't need to generate fake economic activityu.
Isn't this "losing money on each sale but making it up in volume"? Sounds like I heard that before and it did not turn out well.
Walmart back in the 80s investd heavily into physical infrastructure back to back - building new stores, their own trucks fleet. The first retailer with its own satellite communication system. There was never a question about Walmart going bankrupt.
I spent a couple of years in Amazon retail finance. The vendors were incentivized to sell as much as possible, under cost if that helps. Part of my job as financial analyst was to "convince" them it is a bad idea to sell under cost. Very hard and stressful work.
If NVIDIA has a stake in the company, they are less likely to do something like start brewing inference chips in house with the help of the foundry partner and a provider of vanilla chip designs. The company also gets a huge cash injection that is somewhat contingent on not doing that, and hey, they have a fresh pile of cash for cutting edge chips so whatever, right? My first thought was that these deals had more to do with that than anything else.
That aspect may end up being a bit illusory in the end. But then again, Nvidia has been proven to be quite skilled at building out and defending their ecosystem, sometimes through ruthless means, so maybe it persists (and I'm not sure that's a good thing). China certainly isn't a threat to throw a wrench in this situation... the entire US geopolitical complex will ensure that is the case.
The only reason this works is if we are the useful idiots buying up the stock.
Meta point: governments want to tax each money transfer - when people are paid, when selling a real estate property, when selling stocks, when selling goods and services. Every time money changes hands governments want to take a piece. This is the easiest way for me to understand taxation in pretty much any jurisdiction.
Every day one or more article wondering if/when the AI boom will transform into a bursting bubble.
Maybe people are crying wolf or misreading the situation.
My gut feeling is that yes, this is indeed a bubble and behind closed doors the CEOs are in panic mode, weirdly repeating past and well known mistakes
If companies' financial position would be denominated in something else (gold / Yen / Euros / CNY) this comment would make more sense to me....
If the USD loses half its value, the value of Microsoft does not change.
as the usd devalues these stocks will also skyrocket profit/revenue
Paul Tudor Jones (one of the most successful investors of our time) is of the mindset that if anything we are about to see equity appreciation far in excess of what we have seen for decades.
https://fortune.com/2025/10/07/paul-tudor-jones-hedge-fund-b...
If that's the case, right when you're looking to rebalance your portfolio, you're going to be looking at a much more difficult decision, having already missed out on price appreciation that would be quite useful in padding downside risk...
Perhaps just step away from market cap weighted index funds as a long term adjustment. That's something that with a proper basic framework is advisable as a general portfolio management approach as well. (I have some SMLF - Smallcap Quality/Value, Berkshire, generic Global Equity exposure, not for outright returns, but to lower exposure to the concentrated passive market cap weighted indexes and diversify risk exposures).
Trend Following exposure is a great add as well, since it is negatively correlated with risk assets in many macro/market regimes.
Probably healthier to address your very real concern with modifying the long-term portfolio design rather than take a short-term market timing approach which is more of a negative expected value.
The gut feeling you're about to lose your life savings isn't worth it for a lot of people, when I had most of my money invested it was always in the back of my mind. I cashed out and bought land/started building a multi generational house. All doubts and fear disappeared overnight, I'm for sure losing money compared to going all in on Nvidia or even btc, but I don't need any mental gymnastics to rationalize my choice.
interestingly, my wife and I have discussed this a lot too. We have 20 acres in SE Oklahoma that we got a really good deal on during the pandemic, the land is unplatted and the realtor didn't know there was water and power service already setup by the previous owner. We want to build a small cabin/house over the next couple years. It's like a retirement backup plan, "if everything goes to hell we can still go sit on our land in OK and watch the sunset..."
No you can't.
Never touch your portfolio except to rebalance and only rebalance based on risk, not the market.
When the market goes down, delete your banking apps and reset your passwords to random characters. Never sell
That said, there's no reason to have to feel like you need to take a stab at it totally by yourself. Heck, that's what I'm doing in the day to day - putting together a few of these portfolios for people. There are certainly advisors and managers who know the academic side of this and can diversify away from concentration risks and such.
There are also many great tools in the relatively recent future that have opened up for common investors to diversify smartly. You can get pure trend following wrapped up in an ETF. You can get 100% equity 100% bond wrapped up in an etf at half of the size, so you can fit Gold and Trend in a portfolio with no hassle (both are low return but great from a diversification standpoint, so most retail investors want to lever up a bit to get back to the standard SP500 return/variance profile).
If you don't or can't find someone who can math it out for your individual case, it's also an option to just pull a few of the best proven individual ideas, such as "have some international diversification". ETFs are easy to grab here. Even 10-20% can pad out some of the US concentration and dollar exposure a bit. Smallcaps, like you said, are another way to shift away from the "size factor" dominated index weighted ETFs. The Nifty 50 bubble in the 60s was a major catastrophe, and history rhymes, so why not hedge a bit while still sticking to a proven investment framework? No financial advisor is going to look at an equity slice of 80% S&P, 10% international-ex-US, and 10% smallcap and say it's a stupid idea. Actually, they will probably say it's a smart improvement over 100% S&P.
When it comes to smallcaps, the caveat is that the Russel2000 is filled with fairly low quality companies. High debt, value traps, you've got it all. That's diversification, but probably not the type you are seeking. That's why smallcaps are a great target to add some factor based investing returns. This is another diversified source of return in and of itself (AQR as 150 billion under management here), but why not overlay some Quality and Value factors on top of the smallcaps? Now you have a sprinkle of factor investing edge in the portfolio alongside the smallcaps, while not drifting too far from the status quo since smallcaps are a small allocation. Not going to toss out specific investment ideas but there are ETFs/mutual funds for this! Just stick to low fees and a long track record. A question like "I want 10% in smallcaps, but I want a factor overlay for Quality and Value", is a question that would actually get money out of a good advisor by the way.
Here's a good, slightly wonky, lecture on some of the esoteric yet quite "in your face" risks within a complex dominated by passive and index weighted flows. It's not at all a misguided though to think there are some risks out there in the left tails. This was a lecture from 5 years ago: https://www.youtube.com/watch?v=x-rJciYZmi0&t=1s
Like guys... Gold is always worth the same. It's the other currencies that change in exchange rate with gold.
The money between OpenAI, Nvidia, Oracle, AMD is not circulating. There is no cashflow, only future commitments that may (and quite likely will) collapse. Yet the stock market & media react as if it's a sure thing. Even in the criticisms of these deals, the hype is affirmed.
This is the same problem as Enron's accounting, minus the fraud. (No need for fraudulent accounting when people simply don't read the fine print.)
Bubble's only bad if you get out at the wrong time.
Now once these folks don't get 800B per year in revenue and the money runs out, all of the banks go as well. But don't worry - they'll get bailed out with our money...
Is it worse than the dot-com bubble? I remember everyone and their mom who knew HTML could get hired, and there were way more companies that went IPO during the dot-com bubble, like theglobe.com.
AI is a bubble, but is it worse than the dot-com bubble or the real estate bubble in 2008?
IDK, the number of companies and employees might be smaller, but the valuations and comp packages are so much bigger that I suspect there's more money in the bubble this time around, just a bit less spread out.
That seems like a bit of a stretch. How much money is OpenAI making?
I think part of the problem is investors are counting on infinite bailouts because AI is too big to fail. But that also causes USD erosion.
I have no clue what is the way out no matter who is in the driver's seat. And speaking of that, we had a decade of incompetent people in key positions at the Fed/Treasury, BoE, and CBE.
But "nothing ever happens".
Not just different, it specifically a lower tax rate assuming that the stockholder has held long enough to use the long term capital gains tax rate (which lower than the dividend tax rate).
I deeply feel buybacks shouldn’t be illegal but treated shamefully.
Instead of using profits to build up long term savings or fund R&D, they basically choose to do as little as possible.
There is no vision.
Isn't buying stock a form of long term savings? After all, they can always sell that stock when they want to "withdraw".
Sure, they may not get the same return as simply stashing it into a bank account, but it's also a statement of confidence in their future: "We are sure that our stock will outperform every other option there is for storing our money, because our long-term plans include extracting more profit from the market."
Initial situation:
* Big corp M has X$ in cash where X is huge
Big Corp M invest X$ in AI startup O, with a provision that O needs to use most of the money to buy cloud infrastructure from M to power AI models.
End situation:
* Big corp M has X$ wort of shares in O, the value of which will rapidly grow
* Big corp M cloud division has ~X$ in extra revenue
The deal automatically turns X$ into ~2X$ in books. Rinse and repeat with next round deals and next AI startups. The big corps are reporting increased cloud divisions revenue from AI spent, but it is their own investment money flowing back to cloud divisions.
No it doesn't. The revenue it gets back is valued only at a fraction, because it's only worth its profit. Revenue != profit.
And your "the value of which will rapidly grow" is doing all the work here. That's not guaranteed. It might collapse as well.
It's not money printing at all. It's tying up cash long-term in exchange for a much smaller amount of profit short-term. Which is risky but entirely normal.
Nothing "money printing" about it.
Welcome to the casino! Please enjoy your stay, and remember: the house always wins ;)
The last decade has been pretty spectacular for stocks but that doesn’t most of us wizards at investing.
My worst losses have left me with maybe 0.5x-0.25x of my inital investment. But my big wins have been 10x+.
Even if you leveraged hard, brokers would close out your positions before you go negative.
Welcome to how economies work. You only worry when you can’t see where the ends of the circle meet up. Ponzi schemes are notable specifically due primarily to the fact that they’re so directional and one-way. If you can’t pinpoint the escapement and see how it’s feeding into the winding of some other spring, walk away.
Welcome to how economies work. You only worry when you can see where the ends of the circle meet up. Ponzi schemes are notable specifically due primarily to the fact that they’re so directional and one-way.
2000s: cloud bubble 2010s: crypto bubble 2020s: AI bubble
Seems modern economy works different. I missed cloud and crypto and dont wana miss AI so im investing about 20% of my income.
a lot of comments dont really understand finance; and are just repeating gut feelings they align with
That's not a "circular" deal, that's a... regular deal.
I genuinely don't understand the criticism here. Every business deal is -- I'll do something for you, you do something for me, and we'll both be better off. That's the free market.
Regardless of whether AI is a bubble, this is just business as usual.
Why people worry:
• Real demand vs. vendor financing: When the supplier is effectively fronting the cash for the customer’s purchases, it’s not the same as independent spending from end users. Investors and regulators want to see whether OpenAI could buy all those chips without Nvidia’s financing.
• Confusing financials: Nvidia appears to rack up huge sales, while OpenAI’s balance sheet swells with cutting-edge hardware financed by Nvidia. Untangling how much of each company’s “growth” is externally driven versus funded by the other side becomes tricky.
• Risk concentration: Nvidia’s fortunes would hinge on OpenAI delivering an multi-trillion-dollar scale business to justify the investment. If AI demand doesn’t materialize as hoped, Nvidia isn’t just missing chip sales, it’s directly exposed to OpenAI’s downside.
• Governance & optics: When vendor and customer roles blur, people question whether decisions are being made to satisfy true market demand or to juice financial metrics and valuations.
So it’s not that reciprocal deals are bad; it’s that circular, high-dollar deals can obscure what’s actually happening under the hood. That’s why folks are raising eyebrows.
It’s like Sam giving Pat a $20 “investment,” and Pat immediately spending that same $20 to buy Sam’s lunch vouchers. Sam says, “I sold $20 of lunches!” Pat says, “I’ve got $20 in lunches!” But really, it’s one $20 bill just doing a lap.
I'm generally of the same take as you: this reads much more to me like 2009-2013 Apple where they fronted cash to suppliers to do build outs and get to the 10x scale Apple needed ASAP. People looking at this as "proof" there's a "bubble" scare me.
And another: How does it compare against the new breed of Bitcoin treasuries, like Strategy (MSTR.OQ)? As I understand, Strategy uses secondary offerings to continuously see more shares, then uses the capital to buy more Bitcoin.
The bank makes money by lending and cashing interest.
The car maker by selling for profit.
The money goes from bank to OEM, and not the way around, no circle.
I do not know the specifics of Boeing though.
https://www.exim.gov/news/export-import-bank-united-states-b...
https://www.reuters.com/business/aerospace-defense/us-export...
https://www.cato.org/regulation/fall-2015/us-export-import-b...
my money is on 18 months
We can call it a "stock market", or maybe even a "stock exchange". I expect I'll be able to get a patent on it if I prefix the name with "online", or suffix it with "on the internet".
It's plainly obvious where all of this is going.
Or diversify in both directions - small US, and big and small international funds.
I've diversified into international markets that are more resistant to the whims of a dictator and his feeble attempts at monetary policy.
Also any gains in dollar denominated assets should include the >10% haircut the USD has taken since the fascist coup.
But "circular deals" has such a nice ring to it, that you hear it everywhere nowadays. People are just hungry for negative soundbites.
A stronger counterpoint to the circular deals suggestion is at the end of the article, which reads
> Michael Intrator, CoreWeave’s CEO, acknowledged the circular financing worries in a recent interview with Bloomberg News, but said the public concerns will dissipate as more businesses adopt AI.
> “When Microsoft comes to us to buy infrastructure to deliver to its clients who are consuming 365 or Copilot, I don't care what the narrative is about circular financing,” Intrator said. “They have end users that are consuming it.”
It's on you to decide then if end users are actually getting value / paying for AI products.
they're not
https://www.perspectives.plus/p/microsoft-365-copilot-commer...
What credibility does this guy have? Sounds like someone that has an axe to grind.
OpenAI => nVidia => OpenAI. That's pretty circular.
They've discovered a cheat code IMO. Instead of using and raising money themselves, use their reputation/popularity and use their suppliers market caps (e.g. NVIDIA, AMD, etc). The deal makes sense as long as the value projected to be added (i.e. via efficiency gains, loss of jobs, changing society, etc) exceeds the capital dilution for the supplier; they use their equity but the leftover equity value increase makes up for it.
Given all the passive investing, and funds invested in the top tech companies this is a VERY large pool of capital. It however increases leverage if the value doesn't materialise.
But this is not circular. Circular would be if I sell you an apple worth $0.25 for $2.00, and then you sell it back to me for $2.00, or other similar amount, and I get to mark all the apples in my inventory at $2.00 and show a huge profit (on paper). One can create variations of this blatant deal. Like I sell you some rubber for 10 times the market price, you make a balloon and then I buy the balloon for 10 times the market price. I may not have other balloons in my inventory, but plenty of rubber, and I show some nice profit. One can imagine other, fancier deals.
But in the case of AMD and NVidia, and OpenAI and Oracle, the direction is clear. OpenAI has a clear need for compute. They can buy it directly from NVidia and AMD, or indirectly from Oracle. They can buy it with hard cash (of which they don't have that much), or with their own equity, or some form of deal that offers the seller an upside in OpenAI's equity.
But there is not back and forth buying of the same item, or of rubber/balloons. All the deals seem legit. Is it possible that all the future compute will not be needed, because the AI craze will fizzle. It is, lots of things are possible. But that's general business risk.
When you draw a circle on a piece of paper do you put your pencil to the paper, start drawing a curve, stop and write the word FRAUD, and then complete the curve? Or do you just draw a circle?
I’m assuming that people are saying “circular” in that it looks like the money goes in a circle. (For one example) Nvidia invests in Lambda, Lambda buys GPUs from Nvidia, Nvidia leases GPUs back from Lambda, Lambda uses the revenue from leasing the GPUs to Nvidia to raise debt to buy more GPUs from Nvidia…
When you replace people with companies, the financing can become much more complex. The example you provided with Nvidia and Lambda seems quite reasonable to me. Here's an example that happens every day in the world of housing: banks lend money to house buyers. Then they package the mortgages and sell the resulting mortgage back securities. Then they take the money from the proceeds, and give more loans, and package them and create more mortgage back securities. Seems circular, right? But that's just how business is done. There is no Ponzi aspect to this, or fraud, or smoke and mirrors. It's just every day business. Nobody labels that as being circular.
You sound like you know what you’re talking about. I only think I know what I’m talking about. Help me understand: What am I missing in the OpenAI / AMD deal that makes it non circular?
AMD: We need cash too, you know? We'd love to sell you those thousands and thousands of high end GPUs, that would cover some of our R&D, and we could one day match NVidia. But we don't swim in cash either. We can't give you the discount.
OpenAI: What can you give us? You must be able to throw in something there. Otherwise, honestly, we can't make the deal.
AMD: What if we give you some equity? And if our deal goes well, and our GPUs start being viable alternatives to Nvidia's, maybe we'll be able to get close to Nvidia's market cap and even surpass them, just like we did with Intel.
OpenAI: Brilliant. We love it.
AMD: Yes, but that equity will be contingent on how the deal goes.
OpenAI: Sure thing, we'll take that.
Honestly, I'm not an expert either, but I've run a company, and I can all but guarantee that credit_guy above really does not know what he is talking about.
I've replied else-thread, in detail, on exactly why his analogy to mortgage and car loans are incorrect.
His main point that "these deals cannot be circular because mortgage and car finance are not circular" is incorrect. The mortgage and car finance deals are not analogous to the Nvidia/OpenAI or AMD/OpenAI deals.
The AI startup valuation largely is. I feel it quickly becomes circular because people make projections purely on other projections since the world is too impatient to wait and find out.
A single hamburger store is never going to be projected to have a billion dollars of revenue because people understand the total addressable market. Doesn’t matter how good the burger is.
The AI stuff is too new that people don’t have a firm grasp on the costs and profit opportunities. They don’t really even know how to define the TAM. Too many unknowns. Entire classes of labor could be replaced by AI —- or perhaps not.
With little grounding, it quickly becomes a circle of hype.
> Is that circular?
Doesn’t really seem so because at the end of the day the money goes from me to them. I don’t get my money back, I get a car in exchange for my money.
Also this deal didn’t begin with the manufacturer purchasing shares of me before offering me debt to buy a car from them.
>But that is exactly what happens most of the time when people buy a car.
Your car manufacturer leases your car back from you? And you use that revenue to raise debt to buy more cars from them? What manufacturer are you doing this with? What do you end up driving?
Honestly, if this was possible people would be doing it (not that they are not - fleet services and rental fleet services do some pretty funky accounting sometimes, so I wouldn't be surprised at all if this sort of thing happened).
If this was possible, I'd be doing it.
> What manufacturer are you doing this with?
Good question. The minute an answer gets posted I'm going to have a really good side-hustle.
> What do you end up driving?
I presume, at the point that this is being done, there is no actual car involved, so nobody involved will be driving because there is no car to drive.
Yeah “everybody buys cars through the infinite car glitch” sounds like the sort of thing that would be part of an enormously long answer to “should I try WoW for the first time in 2025”
This process is described in the Bible for example!
Perhaps it has some psalms discussing merits of MMT, or parables on Quantitative Easing.
No, they don't!
Serious "Citation Needed" here. They get a loan from a financial services company, that is a separate company from the automaker and/or dealership.
The certification and requirements for trading as a credit provider will not be met by neither the auto manufacturer nor the dealership.
> Here's an example that happens every day in the world of housing: banks lend money to house buyers. Then they package the mortgages and sell the resulting mortgage back securities. Then they take the money from the proceeds, and give more loans, and package them and create more mortgage back securities. Seems circular, right?
No, it doesn't! They make out new loans, sure, but they aren't loaning you specifically the proceeds from the sale of your specific mortgage-backed security!
If you happen to get a new loan from the sale of the MBS, it is impossible that only you get that loan, from the sale of an MBS that had only your existing loan.
Seriously, there's laws and regulations around this, and from what you say, with all due respect, it seems that you are unaware of these regulations.[1]
The only reason that these actually-circular deals can go on right now is because OpenAI (and other providers doing similar circular deals) are not publicly traded, and thus there are fewer regulations and even fewer enforcement of what little regulations there are for unlisted companies.
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[1] Why is your handle "credit_guy"? You don't appear to be familiar with the fact that credit providers are heavily regulated in all jurisdictions that we are talking about. I mean, you don't even need to know the specific regulations and certifications necessary, you just need to know things like a dealer cannot be a credit provider too.
Some, certainly, but the vendor-financing deals certainly look circular to the casual observer. Microsoft invests $X into OpenAI for a 51% (or whatever) stake, and that investment then goes straight back to Microsoft to pay for compute credits.
Or Nvidia invests[1] $100m into OpenAI, which OpenAI then turns around and pays back to Nvidia for compute.
The majority of the deals making the news are structured like this; maybe technically those aren't actual ducks[2], but they sure look, walk and talk like ducks.
Similarly structured deals are with Oracle. And Coreweave. And everyone.
It may not be a "circular" deal, but what do you expect people to call it when a company makes a deal to receive cash (not credit, but actual cash) from a vendor, and spends that cash with that vendor?
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[1] I use this word loosely here - the investment is a commitment of 10x $10m tranches.
[2] I.e. circular deals.
This distinction is important to me because I see more concrete evidence for a possible material drop in NVIDIA's business short- to medium-term than a collapse of the sector as a whole. The chips act clearly shut them out unexpectedly from their second largest market and now it seems likely that Chinese chips will be competitive for training sooner than expected. Indeed, if Chinese AI firms are suddenly able to obtain even a roughly approximate product at considerably less cost, OpenAI will suddenly find themselves at a cost if not compute disadvantage to their Eastern competitors. It isn't a surprise, then, that OpenAI is now looking to reduce their present vendor lock-in with NVIDIA.
Overall, it's not great for the latter if they lose access to their second largest market, suddenly have viable competitors in their home market, and either lose some of a major client's business or have to significantly reduce pricing to retain it.