Nvidia’s announcement earlier this week that it is investing $100 billion into OpenAI to help fund its massive data center build out has added to a growing sense of unease among investors that there is a dangerous financial bubble around AI, and that the revenues and earnings math underpinning the valuations of both public and private companies in the sector just doesn’t add up.
While Nvidia’s latest announcement is by far the largest example, the AI chipmaker has engaged in a series of “circular” deals in which it invests in, or lends money to, its own customers. Vendor financing exists to some degree in many industries, but in this case, circular transactions may give investors an inflated perception of the true demand for AI.
