Who's paying whom? The circular money machine behind the AI boom (or bubble)
Imagine a company that sells you equipment, invests money in your business and then rents back what you build with it. It's your supplier, your investor and your customer all at once.
The AI boom is fueled by a complex network of financing arrangements where chip suppliers, investors, and customers all play multiple roles, often creating a circular flow of money. This opaque method of financing involves a chip supplier investing in a customer like a data center builder, who then uses the funds to purchase the supplier's chips.
These companies report growth, making it difficult for investors to discern how much of the AI boom is driven by genuine demand and how much is a potential bubble. Nvidia, the world's leading chipmaker, has invested billions in AI firms like OpenAI and Anthropic, providing guarantees for data center projects. These circular investments accelerate the expansion of AI infrastructure but obscure the demand from end-users and concentrate financial risk.
If investor sentiment shifts unfavorably towards AI companies, the entire market could suffer, particularly since nearly all stock market gains in recent years have been driven by AI companies. The situation is reminiscent of the 1990s telecom boom, where equipment makers financed customers to buy their equipment, leading to a subsequent stock market crash.
Written by urgent.news from Phys.org's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
