alt Hacker NewsOpenAI, Nvidia fuel $1T AI market with web of circular deals
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This reminds me of around 2002 when I wrote an article looking at how all the web behemoths at the time were claiming profitability through ad sales, but actually the vast majority of ads were from one web behemoth advertising on an other's site and vice versa.
All clearly designed to cash in on the speculative value being given to AI companies.
Strategically I thought OpenAI's deal of getting 10% of AMD for driving their stock price to $600 was a pretty clever way of creating $97 Billion from nothing - effectively paying for the GPUs they'd purchase.
At the same time I would've thought this insider pump and cash-in strategy would be somehow illegal, but I guess anything goes with this administration.
This is fueled by the parabolic token usage. If token usage continues to grow parabolic, then these are the most genius deals made.
If token usage growth declines because of high prices, look at what happened to SBF.
People are bringing up the AMD deal but isn't that giving it too much credence? The deal hasn't had any material consequences yet apart from stock market fluctuations. The bigger problem for me is that AMD doesn't seem like is going to be a player of note in the AI sphere. So this deal like many other big money AI deals look like optics to me.
There is some circular financing going on, but AI accelerationists think this will be offset by demand, value, and adoption in businesses. Hence these deals are warranted for the incoming demand.
I don't understand why they are calling these deals circular. OpenAI is buying Nvidia and AMD chips. Oracle is also buying Nvidia chips. OpenAI is buying datacenters from Oracle, which will be powered by the chips Oracle buys from Nvidia. This is one directional: hardware makers (Nvidia and AMD) sell either to datacenter makers (Oracle), or to AI firms (like OpenAI). That's it. No circular deals.
But "circular deals" has such a nice ring to it, that you hear it everywhere nowadays. People are just hungry for negative soundbites.
For an interesting interpretation of the recent AMD-OpenAI deal, see Matt Levine's column from a few days ago:
> OpenAI: We would like six gigawatts worth of your chips to do inference.
> AMD: Terrific. That will be $78 billion. How would you like to pay?
> OpenAI: Well, we were thinking that we would announce the deal, and that would add $78 billion to the value of your company, which should cover it.
> AMD: …
> OpenAI: …
> AMD: No I’m pretty sure you have to pay for the chips.
> OpenAI: Why?
> AMD: I dunno, just seems wrong not to.
> OpenAI: Okay. Why don’t we pay you cash for the value of the chips, and you give us back stock, and when we announce the deal the stock will go up and we’ll get our $78 billion back.
> AMD: Yeah I guess that works though I feel like we should get some of the value?
> OpenAI: Okay you can have half. You give us stock worth like $35 billion and you keep the rest.
https://www.bloomberg.com/opinion/newsletters/2025-10-06/ope...
Is this the proverbial writing on the wall then?
Every day a new deal involving OpenAI.
Every day one or more article wondering if/when the AI boom will transform into a bursting bubble.
Maybe people are crying wolf or misreading the situation.
My gut feeling is that yes, this is indeed a bubble and behind closed doors the CEOs are in panic mode, weirdly repeating past and well known mistakes
"AI companies say these kinds of large, reciprocal, and sometimes overlapping deals are what's needed to meet growing demand for their tech. But as more and more money gets invested in the space these unorthodox business arrangements are also raising flags for industry analysts who are starting to wonder: Is the trillion-dollar AI market being propped up by the industry itself?"
If memory serves, it's shit like this that sank Global Crossing: creative accounting, I think it was called at the time.
Circular trading is a common technique used in Ponzi schemes to create the illusion of trading activity and to attract more investors.
Upvote because can someone explain to someone as dense as me, whether or not this is likely to make some likely AI bubble worse? Is this just how industry allocates capital?
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.
My brain now reads Sam's face as an "AI generated" watermark.
On the surface, the circular financing seems worrying but once you dig into it, it seems quite benign, tbh. NVIDIA is handing out GPUs into OpenAI, in return for stock/future revenue, whichever way you want to slice it. OpenAI has wonky unit economics, yes, but they're growing at ~100% YoY, so it all checks out, if you ask me.
This and stock buybacks make me question company valuations
All I want to know is, should we be investing into these companies as a result of these deals? Or should we be moving out of these positions.
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Just enjoy it if you can’t avoid it
How about giving Nouveau some actual support so you're not screwing over everybody using Linux
I can't legally define it yet, but I struggle to see how these deals aren't tax evasion, if not outright fraud.
https://archive.is/dvKkB