This and stock buybacks make me question company valuations
OpenAI, Nvidia fuel $1T AI market with web of circular deals
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Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#12This and stock buybacks make me question company valuations
Stock buyback isn't a total scam as it seems, but it does mean "we can't figure out any productive use case for this cash in advancing R&D or scaling our business anymore" which is still pretty worrying
Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#13This and stock buybacks make me question company valuations
Stock buyback is effectively just a dividend with a different tax implication: reducing the number of shares in circulation raises the ownership stake of the remaining shares
Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#14This reminds me of around 2002 when I wrote an article looking at how all the web behemoths at the time were claiming profitability through ad sales, but actually the vast majority of ads were from one web behemoth advertising on an other's site and vice versa.
Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#15For an interesting interpretation of the recent AMD-OpenAI deal, see Matt Levine's column from a few days ago:
> 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...
Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#16I don't understand why they are calling these deals circular. OpenAI is buying Nvidia and AMD chips. Oracle is also buying Nvidia chips. OpenAI is buying datacenters from Oracle, which will be powered by the chips Oracle buys from Nvidia. This is one directional: hardware makers (Nvidia and AMD) sell either to datacenter makers (Oracle), or to AI firms (like OpenAI). That's it. No circular deals.
But "circular deals" has such a nice ring to it, that you hear it everywhere nowadays. People are just hungry for negative soundbites.
Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#17For an interesting interpretation of the recent AMD-OpenAI deal, see Matt Levine's column from a few days ago: > 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: … > Ope…
Levine is fantastic on all sorts of bizarre financial dealings. Money Stuff is such a good daily read even though I don't work in a financial job
Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#18I don't understand why they are calling these deals circular. OpenAI is buying Nvidia and AMD chips. Oracle is also buying Nvidia chips. OpenAI is buying datacenters from Oracle, which will be powered by the chips Oracle buys from Nvidia. This is one directional: hardware makers (Nvidia and AMD) sell either to datacenter makers (Oracle), or to AI firms (like OpenAI). That's it. No circular deals. But "circular deals"…
https://openai.com/es-419/index/openai-nvidia-systems-partne...
OpenAI => nVidia => OpenAI. That's pretty circular.
Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#19"AI companies say these kinds of large, reciprocal, and sometimes overlapping deals are what's needed to meet growing demand for their tech. But as more and more money gets invested in the space these unorthodox business arrangements are also raising flags for industry analysts who are starting to wonder: Is the trillion-dollar AI market being propped up by the industry itself?"
From the outside: sure looks like. Can’t wait to find out if I’m right or wrong.
Re: OpenAI, Nvidia fuel $1T AI market with web of circular deals
#20I don't understand why they are calling these deals circular. OpenAI is buying Nvidia and AMD chips. Oracle is also buying Nvidia chips. OpenAI is buying datacenters from Oracle, which will be powered by the chips Oracle buys from Nvidia. This is one directional: hardware makers (Nvidia and AMD) sell either to datacenter makers (Oracle), or to AI firms (like OpenAI). That's it. No circular deals. But "circular deals"…
Nvidia is also investing hundreds of billions in OpenAI.