Big AI’s reliance on circular deals is raising fears of a bubble

NVIDIA CEO Jensen Huang described the investment of $ 100 billion in OPENAI to his opportunity to invest in the next company “of several billion dollars”.

Nvidia himself is part of this club, with a stock market valuation of $ 4,500 billion.

Investments like that of Nvidia in Openai is based on “confidence in income” that a company can maintain, Huang said on the technological podcast “BG2”.

NVIDIA and OPENAI already have an indirect collaboration, via the darling of Cloud Computing Coreweave, based in New Jersey, which has a permanent agreement with OPENAI to sell NVIDIA systems in OPENAI.

One of Coreweave’s biggest investors? NVIDIA.

There are other players in the thicket. Oracle has announced that it would spend about 40 billion dollars in Nvidia flea to feed one of Openai’s data centers.

Oracle and Openai also collaborate with the Japanese group SoftBank on plans aimed at spending $ 500 billion in additional data centers as part of a project known as Stargate.

Nvidia is a “main technological partner” of the Stargate agreement. SoftBank has a participation of $ 3 billion in Nvidia.

An OPENAI representative returned NBC News to recent comments from financial director Sarah Friar to CNBC, in which she mentioned the need for the company in additional calculation power. But it did not directly address the “circular” question.

Nvidia and Coreweave refused to comment. The representatives of Oracle and SoftBank did not respond to requests for comments.

For some investment advisers, the Nvidia-Openai agreement particularly recalls those announced on the eve of the 2000 Internet bubble bursting.

In March of the same year, the Nasdaq Composite stock market index, with a strong technological component, dropped by 77 % and annihilated billions of dollars in market value.

It will take 15 years before the Nasdaq regained its highest in March 2000.

“There is a healthy part and an unhealthy part” in the AI ​​ecosystem, said Gil Luria, managing director of the financial group DA Davidson who takes care of technology.

The unhealthy part is now marked by “transactions between linked parties” as those involving these companies, he said, which can artificially support the value of the companies involved.

If investors decide that the links between AI giants become too narrow, he says, “there will be a certain deflating activity”. It is the language of Wall Street to designate the bursting of a bubble.

Altman recently sought to appease the fears of an imminent collapse of AI, suggesting that it was part of the life cycle of each industry.

“Between the ten years when we are already active and the many decades to come, there will be ups and downs,” said Altman last month during a visit to the immense complex of data centers that Openai is building in Abilene, Texas.

“People will overinvest and lose money, and undergo and lose a lot of income,” he said.

The concerns about the IA IA transaction and investment network have been counterbalanced by the short -term potential of almost unimaginable yields.

Rather than worrying about whether AI is really developing at the rate it seems to be, many investors focus on the ability of businesses to grow quickly enough and make enough profits to justify the colossal investments devoted to them.

“For all this massive experience to work without causing significant losses, [OpenAI] And his peers must now generate enormous income and profits to pay all the obligations they subscribe to and at the same time provide a return to his investors, “wrote Peter Boockvar, ONEPOINT BFG WEALTH PARTNERS and author of the BOOCK report.

As long as the valuations of technological companies continue to surrender and investors continue to get rich, Wall Street will always have an interest in blessing the boom and ignoring the apocalyptic scenarios.

On Wednesday, more than 35 % of the market value of all companies in the S&P 500 index – more than $ 20,000 billion – came from only seven technological companies, collectively known in Wall Street under the name of “Magnifice 7”.

And each of them – Apple, Alphabet, parent of Google, Amazon, Meta, Facebook parent, Microsoft, Nvidia and Tesla – is strongly involved in AI projects.