OpenAI, Nvidia fuel $1T AI market with web of circular deals

In the end with most of these deals its the shareholders paying through market cap dilution. Given the current market structure (the big companies are tech companies) there's PLENTY of capital for OpenAI to fund their expansion.

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.

I prefer https://www.bloomberg.com/news/features/2025-10-07/openai-s-... which shows the circularity in the deals.

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.

Yeah I spoke to my wife a few min ago about these deals and other indicators of a bubble. We’re updating our 401k’s and the old college fund brokerage account in the morning and have agreed to not make any additional changes until Jan 2027. Going to sit out a year and see what happens.

Yes. OpenAI is also investing in AMD. This was discussed yesterday on HN, following some very good explanation by Matt Levine at Bloomberg. This is a way for one party to reduce some risk, by enjoying some upside in the equity of the counterparty.

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.

All I want to know is, is the bubble going to pop next week, next month, or two years from now?

Welcome to the casino! Please enjoy your stay, and remember: the house always wins ;)