Three years ago generative artificial intelligence was barely noticed. The article traces a rapid shift: circular deals moved from private whispers to a central topic on Wall Street as investments ballooned into multi billion chip purchases and multi gigawatt data centre projects. Circular deals are described as loops where an investor pours capital into an artificial intelligence start up and the start up commits to buy cloud compute, chips and infrastructure from the same investor.
The piece illustrates the loop with high profile examples. Microsoft and Nvidia made multi billion commitments to Anthropic while Anthropic agreed to spend heavily on Microsoft Azure and Nvidia GPUs, returning a large portion of capital to those firms through contracts. OpenAI is presented as an extreme case: Nvidia has pledged up to ? billion, OpenAI is one of the largest buyers of Nvidia GPUs, AMD supplied chips while granting OpenAI warrants, Oracle built super data centres under a partnership nominally worth over ? billion, and SoftBank injected capital while building infrastructure for OpenAI’s Stargate project. The article emphasises the scale of compute demand, noting next generation sites require 1 to 4 GW each and that McKinsey estimates meeting global artificial intelligence compute demand will require ? trillion in capital expenditure by 2030.
Debate over whether this is a bubble is active. ChatGPT, Grok and Gemini all characterised the moment as a bubble or a frothy swell but expected long term persistence of the technology. The article notes striking valuations, including Nvidia’s market capitalisation compared with the global pharmaceutical industry, and reports high profile investors such as Michael Burry shorting companies tied to the boom.
Financial fragility is highlighted. OpenAI reportedly generated around ? billion in annual revenue while operating losses persist, creating a pricing dilemma between raising prices and preserving scale. Oracle emerges as a strategic beneficiary but the article warns that tightly intertwined financing could amplify any external shock. The author draws parallels to the dot com era, arguing that a cluster of shocks rather than a single factor burst that bubble, and concludes that circular financing has accelerated build out but has created a fragile, interdependent ecosystem whose fate will be revealed by time or an external disruption.
