Nvidia’s (NVDA) Investment in OpenAI Highlights Circular Financing Concerns

Andvari Associates, an investment management firm, recently released its first-quarter 2025 investor letter, highlighting the strong performance of its portfolio. The firm has expressed caution about the AI sector, noting the extreme hype and disconnect between valuations and future cash flows. This disconnect may lead to a decline in AI investment over the next 1-3 years, despite current high demand for AI infrastructure.

Concerns about potential pitfalls, such as overbuilding and risky financial behaviors, are mounting. Andvari has reduced its exposure to this sector to protect and grow assets through disciplined investments in stable industries. In its Q2 2026 investor letter, Andvari Associates also mentioned NVIDIA Corporation (NASDAQ:NVDA), a leading data center-scale AI infrastructure company.

NVIDIA has been involved in circular financing practices, where companies like NVIDIA and Anthropic have invested in special purpose vehicles (SPVs) to buy hardware from the same hardware makers, creating a cycle of borrowing and leasing chips. This type of behavior is similar to what led to financial troubles during the dot com bubble of the 1990s.

NVIDIA is currently the fourth most popular stock among hedge funds heading into 2026, with 285 hedge fund portfolios holding its stock as of the second quarter.