<a href="https://archive.is/dvKkB" rel="nofollow">https://archive.is/dvKkB</a>
There is a beautiful scene from "The Wolf of Wall Street", in which Matthew McConaughey outshines Leonardo DiCaprio.<p><a href="https://www.youtube.com/watch?v=Y4iBdIq0aaY" rel="nofollow">https://www.youtube.com/watch?v=Y4iBdIq0aaY</a><p>I think it serves as a good commentary.
In my experience, people working on these deals at OpenAI, Nvidia, Oracle, etc., sincerely believe their own PR.<p>They remind me of the story about the oil prospector in Warren Buffett's year-end 1985 letter to Berkshire Hathaway shareholders:<p>> An oil prospector, moving to his heavenly reward, was met by St. Peter with bad news. “You’re qualified for residence”, said St. Peter, “but, as you can see, the compound reserved for oil men is packed. There’s no way to squeeze you in.” After thinking a moment, the prospector asked if he might say just four words to the present occupants. That seemed harmless to St. Peter, so the prospector cupped his hands and yelled, “Oil discovered in hell.” Immediately the gate to the compound opened and all of the oil men marched out to head for the nether regions. Impressed, St. Peter invited the prospector to move in and make himself comfortable. The prospector paused. “No,” he said, “I think I’ll go along with the rest of the boys. There might be some truth to that rumor after all.”<p>Source: <a href="https://berkshirehathaway.com/letters/1985.html" rel="nofollow">https://berkshirehathaway.com/letters/1985.html</a>
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.
Same as capacity swaps in telecom of that era
This is How Larry Elisson beat Musk for a short while although Oracle was struggling.' The deals among Oracle, Nvidia, and OpenAI have raised concerns about their circular and potentially risky nature. Oracle is reportedly spending tens of billions on Nvidia's advanced chips, Nvidia plans to invest up to $100 billion in OpenAI, and OpenAI uses Oracle's cloud infrastructure through Microsoft's Azure, creating a closed loop of financing and business. Some analysts warn this creates a reflexive loop or "dangerous bubble" where valuations may be inflated artificially by the circular flow of capital and resources, reminiscent of past booms that ended in sharp market corrections.
If this means that the fall of OpenAI will cause Oracle and Nvidia to crash and downsize, bubbles aren't completely bad.
You can't discount the impact this will have on global stock markets and what that may do to both individuals and, more importantly, pension funds, as a large swath of people are retiring
Damage is unavoidable, we can only hope that it happens to someone deserving. Innocent individuals and pension funds still have time to retreat; if they don't it will be their fault.
Yes but this is by design. Wealthy people want bubbles, when they pop, you can gobble up all the value at all time lows. Then you hold until you don't feel like it anymore as the market goes back to growing. You see this as how private equity has bought up real estate across the USA to turn into rentals after 2008, for example.
> If this means that the fall of OpenAI will cause Oracle and Nvidia to crash and downsize<p>Only if those are the only actual real customers. It's not. The pie is a lot bigger. And with the current hype some other AI company will just take over and the bubble will continue.
Is it fair to say OpenAI is in a sense “washing” the money passing between Nvidia and Oracle? And instead of taking a cut in the traditional money laundering they are enjoying massive valuation gains?<p>When the fed investigates this does it matter if one of the 3 companies is not a publicly traded company?
I guess you could see it like that but I don’t think it’s “wash trading” in the sense that they’re coordinating it. I don’t really know what the fed would investigate here.
What you're missing is that real value can be created in these exchanges - Nvidia really makes chips for example.<p>The issue is that it's an industry of investment which exists solely to power more investment in AI - the entire chain is still assuming that someone will eventually pay for this.<p>At the end of the day all that money leaks out to employees and suppliers...but no one those people transact with may have any interest in buying what was produced.
Leaks out? Don’t you mean “trickles down”?
That's only really value if the chips are useful and if there are people buying the chips for something they want to do with them.<p>It's entirely based on the perception that LLM training & inference is here to stay at ever growing scales when the shortcomings of Artificial Dreaming are increasingly scrutinized. Not all businesses want to end up paying refunds to their clients like Deloitte [1] because the LLM hallucinated crap into their reports (and they failed to correct it).<p>[1] <a href="https://www.theguardian.com/australia-news/2025/oct/06/deloitte-to-pay-money-back-to-albanese-government-after-using-ai-in-440000-report" rel="nofollow">https://www.theguardian.com/australia-news/2025/oct/06/deloi...</a>
Oracle most certainly is not struggling. Even putting aside the NVidia deal, their cloud business is thriving.
They give you 4 nodes with 1 vcpu and 6GB RAM each for free forever by the way. Most other stuff has a free tier too.<p>I used it to learn terraform and have a kubernetes cluster running.<p>I know it's always trendy to bash oracle and simp for AWS, but it is THE best option for learning and hobbyists.
On a sofware salary, would rather pay the 20 something to a provider like hetzner instead of giving my personal info to oracle
That's very cool. I was going to get a hetzner for some hobby projects.<p>Can you get that without adding a payment mechanism? For some reason, I'd be more cautious about putting my card into Oracle's offering than anyone else.
> Can you get that without adding a payment mechanism?<p>No!<p>There are actually two free tiers.<p>The limited free tier you get without adding a CC and then this advanced "always free" tier I am using, where you have to use and verify a CC and have to pay big bucks if you mess up.<p>limited free tier: 300$ to be spent in 30 days<p>advanced always free tier: <a href="https://docs.oracle.com/en-us/iaas/Content/FreeTier/freetier_topic-Always_Free_Resources.htm" rel="nofollow">https://docs.oracle.com/en-us/iaas/Content/FreeTier/freetier...</a>
So it's free... Until is not. My take on this would be that if Oracle makes any change to that "free" tier and you do not take proper action you might be automatically charged hefty amounts from your credit card. No, thanks. It's way way safer to spend few bucks a month in other VPS options than get a big surprise on your credit card.
Messing up with Oracle is a bit different from messing up with Google. I'll go with Hetzner which I love anyway. :)
You can also get all of that in a single node, which makes for a fairly beefy build server :)
Uh, you can get that level of compute locally easy peasy.<p>Learning terraform isn't hard, it's what you stitch together with terraform that is hard.
I think the point here is that free beats easy peasy, especially when learning a new skill, where your easy peasy isn't their easy peasy. And getting something up and running on Oracle Cloud with Terraform is nowhere near easy peasy for someone who never did anything with Terraform ;)
It's worth noting Elisson is 2 years older than Trump.<p>What's he going to do with all that money, and what does he care for the risk it's bad or shady?<p>Worst case, he got to be #1 for a bit for a few dozen billion, best case he's hoping AGI will extend his life before he croaks.
Doubt he believes that. Getting AGI (whatever that actually means) means we are still far away from reversing ageing.
Even smart people belive a lot of untrue things, and his domain of knowledge isn't likely to include much more biology than my GCSE grade C and a handfull of brilliant.org micro-lessons; it's quite possible, though I would not put specific odds on it, that he's seen e.g. the sudden change in the rate of progress in protein folding, where before it was ~ one PhD thesis per protein and then suddenly AlphaFold did all of them, and extrapolated from that to everything else like an over-enthusiastic PopSci reporter.
(Interestingly, some of the world's dictators do seem to have an interest in the current state of the art in prolonging life. For example Xi and Putin chatted about organ replacement <a href="https://www.bbc.com/news/articles/cr70rvrd41ko" rel="nofollow">https://www.bbc.com/news/articles/cr70rvrd41ko</a>)
Ah yes, my favourite philosophical dilemma, The Organs of Theseus, and whether or not a sufficiently organ-replaced person is absolved of their previous actions by virtue of not necessarily being the same person.<p>As a more serious point related to this though, I was under the impression that organ replacement didn't address issues with telomere length?
That's why I keep saying we need to start and keep shooting any scientists involved heavily with this type of research. It will be snatched and kept from common folks by most brutal and vicious power hungry greedy paranoid psychopaths. And they certainly would not want anybody else on peer level.<p>These folks would burn whole world to ash as long as they can keep position on top of some pile. Imagine trump or putin for thousands of years, enslaving rest of humanity. With near-perfected AI oppression, some form of butlerian jihad would be probably ineffective.
What does Ellisons personal wealth have to do with this? The concern is that the circular pattern of shifting money between these companies is artificially inflating the stock market to heights that will crash very very badly when this bubble finally pops.
> What's he going to do with all that money, and what does he care for the risk it's bad or shady?<p>The thing that unites Ellison, Trump, Musk, Thiel and a fair few of the other politically active billionaires is the obsession with "legacy" - they want to leave their mark in the history books, figures which will likely be remembered and taught in schools in thousands of years similar to Roman emperors.<p>Musk is the most obvious with his obsession of settling (and eventually dying) on Mars, Trump is dreaming of getting a Nobel Peace Prize (if only to not let Obama be the only US President who got one), and the rest is hunting for the "invented AGI" crown.
Obama was the fourth U.S. president to be awarded the Nobel Peace Prize, after Theodore Roosevelt (1906) and Woodrow Wilson (1919)—both of whom received the award during their terms—and Jimmy Carter (2002), who received the award 21 years after leaving office. - wikipedia
> while although Oracle was struggling<p>In terms of actual earnings not sure Tesla is doing better.
Do you happen to have a copy of that article? I’d love to read it.
Also a pg essay from 2010: <a href="https://www.paulgraham.com/yahoo.html" rel="nofollow">https://www.paulgraham.com/yahoo.html</a><p>>By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"
That's not how Ponzi schemes work. Yahoo had a defacto _monopoly_ and the market had bad discovery leading to bad price information. There was no point at which the internet was /not/ worth investing in and everyone who had experience with it knew that.<p>The real problem seemed to be that you can only put so much money into pets.com before it becomes stupid. You had more short term investment capital than could be _effectively_ spent at the time. The long term players, as usual, avoided the Archimedian idealism, and were heavily rewarded anyways.<p>pg has startup brains.
Same issue with LLMs - there probably is real value there, but investors have rammed 10 years' worth of investment into the market in 10 months.<p>That means:
1) Late investors end up taking a bath because it will actually take 10x longer to get a return than they thought.
2) Investment becomes inefficient - there are lot of GPUs being bought in 2025 that should have been bought in 2030. By the time 2030 comes along, those 2025 GPUs will be outdated, so the value they will provide will be less than if they had been purchased at the correct time
pg has completely clairvoyant vision, if only about historical events
Why is it so popular to "akshually, Ponzi schemes are different!" these days?<p>Words have meaning in context, and calling something a "Ponzi scheme" these days means any pyramid-like system that only works as long as new investors come to the table, because that new investor money is the sole source of gains for earlier investors. But once you run out of new investors, which is inevitable, the whole thing collapses. What pg described was exactly a Ponzi scheme in that sense, even if it wasn't a deliberate scam. And that's very different from other types of business ventures that eventually fail because of the more "normal" reason that they just don't gain traction.
Agree, people became extremely pedantic with words and it's incorrect to assume they only mean what is described in a dictionary, as if we are in a court.<p>Language is fluid, and many of words got their very known & popular meanings later, when people used for things that it didn't exactly mean what it was initially intended to, and it got popular.<p>People are ever less empathetic and sociable, this being the reason for such comments.
People become pedantic when it's the only way to defend themselves and their friends or to argue against someone.<p>In this case dotcom investing was so stupid that it should have been recognized as stupid at the time, without hindsight.
For someone who lost money, gave bad advice etc. insisting that they didn't fall for a Ponzi scheme means representing themselves as less terrible investors, regardless of facts.
> Words have meaning in context<p>And you do recognize the context of those words was 15 years ago at this point?<p>> was exactly a Ponzi scheme in that sense, even if it wasn't a deliberate scam<p>There are better terms of art to describe the scenario. If we lacked for those words I might grant you this point, but since we don't, I find the description lacking in precision if not completely faulty.<p>> the more "normal" reason that they just don't gain traction.<p>Is that actually the "normal reason" most businesses fail? I'm not sure it is.
But you can't fake profits that way (without cooking the books); you can only fake revenue. That's why profits matter.<p>Though I guess with high velocity of money circulating in tight loops, everyone involved can feel rich. 1 million dollars changing hands once per day can mint 365 'millionaires' during the course of a year. If they just pass it back and forth among themselves and don't let that money escape their network to actually pay for something useful, they can all be millionaires... On paper.<p>Not to mention how relatively small amounts of money, moving at high velocity, can inflate asset prices... On Alice's birthday, Bob can buy 100 shares of Alice's company at a price of $10 per share. If Alice owns 1 million shares of the company (which she founded), it means that Alice's net worth is at least $10 million... It cost Bob only $1000 to give Alice a net worth of $10 million. Now imagine that same $1000 moving in and out of that company's stock, traded 1000 times per day between various people. With just $1000 circulating back-and-forth at high frequency (A.K.A. high-frequency trading), you can generate a trade volume of $1 million per day... So it all seems fair; a company with a $10 million valuation with $1 million daily trade volume... Nothing suspicious. So you can basically fake everything; from the market cap, to the trade volume; using only a relatively small amount of money. This is what they were doing in the early days of crypto.<p>The same money can hop around in circles between an insane number of people when it's just 'revenue' because revenue is not taxed (after expenses). Only profits are taxed... But the same money, as profit, can barely hop between 6 people before it's taxed down to just 10% of its original number. High-velocity revenue can severely distort people's perceptions of the market, especially in the era of media filter bubbles.
This is going to end badly — and soon. It’s ironic that catastrophic forgetting (i.e., the inability to perform continuous learning) and hallucinations (i.e., the failure to recognize when a prediction is unfounded) won’t be the causes of the crash, but rather greed and stupidity.
All clearly designed to cash in on the speculative value being given to AI companies.<p>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.<p>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.<p>If token usage declines because of high prices, look at what happened to SBF.
I notice that when I ask ChatGPT a question the answers I get back seem more verbose than they were a year ago. Where a 1-2 line response would be sufficient GPT delivers a sprawling essay. Overall the value of the answer has probably gone down, but tokens are up.
> look at what happened to SBF<p>SBF lacked funds to ride it out. If they survived for a bit longer, Bitcoin would have surged and they'd keep going. AMD, Nvidia etc all have income and funds to survive.<p>This is just about finances unless you're implying there's some crime here too.
A 0.1% tax on all money transfers (or any other transfers of value from entity A to entity B) would end this...
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.
> AMD doesn't seem like is going to be a player of note in the AI sphere.<p>I thought AMD is well positioned in the inference space? They have high VRAM, somewhat high connectivity, already shipping pods that are pretty ok for inference? Training is still dominated by nvda and their CUDA moat, but there's an increased need for scalable inference, and that should fit AMD well. Am I wrong in thinking that?
Why does "Web of circular deals" sounds like a scam?
For an interesting interpretation of the recent AMD-OpenAI deal, see Matt Levine's column from a few days ago:<p>> OpenAI: We would like six gigawatts worth of your chips to do inference.<p>> AMD: Terrific. That will be $78 billion. How would you like to pay?<p>> 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.<p>> AMD: …<p>> OpenAI: …<p>> AMD: No I’m pretty sure you have to pay for the chips.<p>> OpenAI: Why?<p>> AMD: I dunno, just seems wrong not to.<p>> 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.<p>> AMD: Yeah I guess that works though I feel like we should get some of the value?<p>> OpenAI: Okay you can have half. You give us stock worth like $35 billion and you keep the rest.<p><a href="https://www.bloomberg.com/opinion/newsletters/2025-10-06/openai-is-good-at-deals" rel="nofollow">https://www.bloomberg.com/opinion/newsletters/2025-10-06/ope...</a><p><a href="https://archive.is/tS5sy" rel="nofollow">https://archive.is/tS5sy</a>
Discussed yesterday:<p><i>OpenAI is good at deals</i> - <a href="https://news.ycombinator.com/item?id=45493815">https://news.ycombinator.com/item?id=45493815</a> (40 comments)
Levine is fantastic on all sorts of bizarre financial dealings. Money Stuff is such a good daily read even though I don't work in a financial job
There's no way someone would be stupid enough to part with $x worth of product and $ 0.5 x worth of stock in exchange for $x, is there? Honestly, it's stupid to even make such an offer. What prevents AMD from turning it around on them?<p>> AMD: Oh, since you put it like that, why don't you pay us $x for the chips and give us $ 0.5 x worth of stock? When your market cap rises by $ 0.5 x you'll get the money for those stocks. And hell, it might even rise further, giving you back some of the money for those chips. You're really robbing me blind with this deal, you'd be a fool not to take it!
>What prevents AMD from turning it around on them?<p>Matt's telling is a little facetious, so the exact negotiation probably didn't go like that. More importantly, OpenAI has better options. If they want to pay AMD cash for chips, they could do that without also giving up their equity. The same can't be said for AMD. They're the second choice when it comes to GPUs, and they're desperate for market share, so they're willing to cut deals like this. Without this deal OpenAI probably would have bought Nvidia chips with cash.
<p><pre><code> bought Nvidia chips with cash
</code></pre>
"OpenAI and Nvidia announce partnership to deploy 10GW of Nvidia systems" (600 comments), <a href="https://news.ycombinator.com/item?id=45335474">https://news.ycombinator.com/item?id=45335474</a><p><i>> NVIDIA intends to invest up to $100 billion in OpenAI progressively as each gigawatt is deployed.</i>
AMD might do it just to try and be (stay) relevant in the market. Prior to this, discussions about AMD were slim to none, "just another inference card manufacturer". Now they're shining in the spotlight. Mission accomplished.
Because OpenAI has the hype and delivers the pop, not AMD. An AMD investment in OpenAI would probably have had a similar effect on AMD, not an equivalent one on OpenAI. (Either way it's <i>Ooh AMD is getting seriously into AI, awesome, suddenly it seems worth 100x whatever it was before!</i>)<p>Replace AMD & OpenAI with some crypto company and Trump, hypothetically the latter doesn't really obviously get any significant benefit from the former's endorsement.
Oh this just seems like the typical financial dealings that City of London invented to obfuscating ownership of holdings half millennium ago. Some would event argue this obfuscation what transferred power from the military to bankers. And it is how we end up in this transnational corporation where the public really have no idea who is owning what and who is actually running the show here.<p>Now we are just transferring the power from bankers -> tech/AI.
Does he explain why the valuation of the company would go up by $78 billion on the public news that AMD agreed to give $78 billion of goods to OpenAI for free?
This reminds me of the AOL Time Warner merger. "Back in the day", America Online (AOL) had a valuation large enough to pull it off:<p><pre><code> It was the largest merger in history when completed with
the combined value of the companies at $360 billion.[0]
</code></pre>
After less than a decade, once ISP's became a thing, the AOL part of the new company shriveled into nothing and was spun off. It still exists, in name if not anything recognizable to what it once was.<p>0 - <a href="https://en.wikipedia.org/wiki/AOL#2000%E2%80%932008:_As_AOL_Time_Warner" rel="nofollow">https://en.wikipedia.org/wiki/AOL#2000%E2%80%932008:_As_AOL_...</a>
It’s just AMD levering up on its on stock. Similar to MSTR. AMD is taking a loan against its own shares to build gpu’s hoping to rent them out via OpenAI in the future. No point in betting against it, because it can’t get margin called until OpenAI goes bankrupt. Which isn’t happening until OpenAI is worth $10 trillion first.<p>From the OpenAI side, it’s an amazing deal. $35B profit in one day… at a pe of 30, it’s already worth a trillion if it can repeat similar deals every year.
Anyone remember the subprime crisis?
The other day I was helping somebody choose some funds to invest in. The majority of "global" or "index" funds we looked into either directly or indirectly had the largest share of holdings in Nvidia, Microsoft, Meta, Alphabet, AMD. Often these were about 50-70% of their portfolio. The returns for the past year look great but the crash is going to be devastating and widespread because so many investments link back to this bubble.
this is going to be bigger, mostly because the leadership vaccume in the US Gov is all too happy for it to get very big before it goes bang.
What is the economy if not a bunch of much larger overlapping circles of different sizes?
Every day a new deal involving OpenAI.<p>Every day one or more article wondering if/when the AI boom will transform into a bursting bubble.<p>Maybe people are crying wolf or misreading the situation.<p>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
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.
"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?"
> remains largely unproven as an avenue for profit-making<p>That seems like a bit of a stretch. How much money is OpenAI making?
clearly openAI is the top dog here who can hoover all the money , but it's not a public company
Is this the proverbial writing on the wall then?
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.
Equities in the US are priced in dollars. If you think the dollar is going to lose value(because the government is led by people who have repeatedly told you this is their goal) then you expect stocks to rise commensurate with the devaluation of the dollar. I am not a bitcoiner or saying the USD is done for, but it seems clear that the dollar is weakened and will continue to weaken and this is a significant risk for folks like me with minimal exposure to stocks and precious metals.
These sorts of outlooks are notoriously hard to predict.<p>Paul Tudor Jones (one of the most successful investors of our time) is of the mindset that if anything we are about to see equity appreciation far in excess of what we have seen for decades.<p><a href="https://fortune.com/2025/10/07/paul-tudor-jones-hedge-fund-billionaire-markets-more-explosive-than-1999/" rel="nofollow">https://fortune.com/2025/10/07/paul-tudor-jones-hedge-fund-b...</a><p>If that's the case, right when you're looking to rebalance your portfolio, you're going to be looking at a much more difficult decision, having already missed out on price appreciation that would be quite useful in padding downside risk...<p>Perhaps just step away from market cap weighted index funds as a long term adjustment. That's something that with a proper basic framework is advisable as a general portfolio management approach as well. (I have some SMLF - Smallcap Quality/Value, Berkshire, generic Global Equity exposure, not for outright returns, but to lower exposure to the concentrated passive market cap weighted indexes and diversify risk exposures).<p>Trend Following exposure is a great add as well, since it is negatively correlated with risk assets in many macro/market regimes.<p>Probably healthier to address your very real concern with modifying the long-term portfolio design rather than take a short-term market timing approach which is more of a negative expected value.
> These sorts of outlooks are notoriously hard to predict<p>The gut feeling you're about to lose your life savings isn't worth it for a lot of people, when I had most of my money invested it was always in the back of my mind. I cashed out and bought land/started building a multi generational house. All doubts and fear disappeared overnight, I'm for sure losing money compared to going all in on Nvidia or even btc, but I don't need any mental gymnastics to rationalize my choice.
If we end up with inflation rather than a market crash, this could be quite costly? Gold is up 50% this year, which hype is more correct than the other?
I am for a medium risk profile and I've already started diversifying. A lot of major "global" or "index" tracking funds are now majority comprised of holdings in Nvidia, Microsoft, Meta, Alphabet and also Tesla. I've seen many supposedly non-tech funds where about 50-75% of their portfolio are linked to this bubble. Sometimes the holdings aren't clear if the fund invests in other funds. As an individual investor I won't be able to react fast enough to a crash, so am being proactive with moving investments so that no more than half is exposed. Will obviously keep an eye on things to reduce that if it looks wise.
The MI450 is the pets.com from the 90s of AI hardware. It's bad.<p>The bubble now isn't even about LLMs, but has affected the entire stack. Even hardware companies are offering rubbish for the sake of prop'ing up their own valuation.<p>CUDA had decades of improvements, we may have AGI (tm) earlier than what it will take AMD to fix their broken software.<p>MI450 doesn't work well at all, OpenAI would rather take the deal and overspend in a project to try to use it for their software stack, which is incompatible with it.<p>Just for the sake of proping up valuations, with no "market competitiveness" guidance. Just for moving money.<p>Funnily enough, Google is ahead of all of this, as they can make their on TPUs and have their integrated stack. They don't need to generate fake economic activityu.
This incest investing is pretty telling. The whole economy is about to get burned- doubly so with DJTs tariffs and bonds not looking like the safe haven they usually are during turbulent times.<p>“We’re now locked into a particular version of the market and the future where all roads lead to big tech,” says Amba Kak, co-executive director of the AI Now Institute, which studies AI development and policy. Indeed, the success of major stock indexes—and perhaps your 401(k)—is resting on the continued growth of AI: Meta, Amazon, and the chipmakers Nvidia and Broadcom have accounted for 60 percent of the S&P 500’s returns this year."
If memory serves, it's shit like this that sank Global Crossing: creative accounting, I think it was called at the time.
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?
Part of what's concerning here is that the deals are <i>conditional</i>. OpenAI must meet XYZ conditions before cash/stock/etc is transferred, and the conditions are pretty hard to meet.<p>The money between OpenAI, Nvidia, Oracle, AMD is not circulating. There is no cashflow, only future commitments that may (and quite likely will) collapse. Yet the stock market & media react as if it's a sure thing. Even in the criticisms of these deals, the hype is affirmed.<p>This is the same problem as Enron's accounting, minus the fraud. (No need for fraudulent accounting when people simply don't read the fine print.)
These deals certainly make the bubble look larger because people are double-counting revenue. They also seem to be triggering extreme investor FOMO.
The money is allocated by institutional investors. They buy the stock, the companies trade their more valuable stocks amongst themselves for various deals. If institutional investors stop investing then the flow of deals stops & the bubble pops. There is nowhere else the institutional investors could park their money other than tech so I don't think the bubble is going to pop any time soon. But infinite growth is obviously a logical & physical impossibility so eventually there will be a correction but whoever says they know exactly when that will happen is lying & they'd be better off buying lottery tickets to cash in on their ability to predict the future.
>AI bubble worse?<p>Is it worse than the dot-com bubble? I remember everyone and their mom who knew HTML could get hired, and there were way more companies that went IPO during the dot-com bubble, like theglobe.com.<p>AI is a bubble, but is it worse than the dot-com bubble or the real estate bubble in 2008?
> Is it worse than the dot-com bubble? I remember everyone and their mom who knew HTML could get hired, and there were way more companies that went IPO during the dot-com bubble, like theglobe.com.<p>IDK, the number of companies and employees might be smaller, but the valuations and comp packages are so much bigger that I suspect there's more money in the bubble this time around, just a bit less spread out.
Personally think this makes a tech bubble a contagion for other parts of the financial industry - especially if institutional investors take the "easy" trade that everyone is doing and add leverage to it.<p>Now once these folks don't get 800B per year in revenue and the money runs out, all of the banks go as well. But don't worry - they'll get bailed out with our money...
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.<p>But "circular deals" has such a nice ring to it, that you hear it everywhere nowadays. People are just hungry for negative soundbites.
I prefer <a href="https://www.bloomberg.com/news/features/2025-10-07/openai-s-nvidia-amd-deals-boost-1-trillion-ai-boom-with-circular-deals?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc1OTk3MDQzMCwiZXhwIjoxNzYwNTc1MjMwLCJhcnRpY2xlSWQiOiJUM1MyOEFHUEZIT1cwMCIsImJjb25uZWN0SWQiOiJFNkE5ODhCODFBNUI0RTY4OEIyMTBBMTI3MzIxNEYwRiJ9.Qq4rNdypttk6f39U7FmYinw_-K-Ixylr1h4KO0O35RQ" rel="nofollow">https://www.bloomberg.com/news/features/2025-10-07/openai-s-...</a> which shows the circularity in the deals.<p>A stronger counterpoint to the circular deals suggestion is at the end of the article, which reads<p>> Michael Intrator, CoreWeave’s CEO, acknowledged the circular financing worries in a recent interview with Bloomberg News, but said the public concerns will dissipate as more businesses adopt AI.<p>> “When Microsoft comes to us to buy infrastructure to deliver to its clients who are consuming 365 or Copilot, I don't care what the narrative is about circular financing,” Intrator said. “They have end users that are consuming it.”<p>It's on you to decide then if end users are actually getting value / paying for AI products.
> It's on you to decide then if end users are actually getting value / paying for AI products.<p>they're not<p><a href="https://www.perspectives.plus/p/microsoft-365-copilot-commercial-failure" rel="nofollow">https://www.perspectives.plus/p/microsoft-365-copilot-commer...</a>
"Brutally honest and cheerfully sarcastic insights on Microsoft’s low-code and AI technology, business apps, and the business of software - written by Jukka Niiranen"<p>What credibility does this guy have? Sounds like someone that has an axe to grind.
Sounds like the circle was broken with a Ponzi scheme in the middle…
“When Microsoft comes to use….” is he counting chickens before they hatch?
<a href="https://openai.com/es-419/index/openai-nvidia-systems-partnership/" rel="nofollow">https://openai.com/es-419/index/openai-nvidia-systems-partne...</a><p>OpenAI => nVidia => OpenAI. That's pretty circular.
In the end with most of these deals its the shareholders paying through market cap dilution. Given the current market structure (the big companies are tech companies) there's PLENTY of capital for OpenAI to fund their expansion.<p>They've discovered a cheat code IMO. Instead of using and raising money themselves, use their reputation/popularity and use their suppliers market caps (e.g. NVIDIA, AMD, etc). The deal makes sense as long as the value projected to be added (i.e. via efficiency gains, loss of jobs, changing society, etc) exceeds the capital dilution for the supplier; they use their equity but the leftover equity value increase makes up for it.<p>Given all the passive investing, and funds invested in the top tech companies this is a VERY large pool of capital. It however increases leverage if the value doesn't materialise.
I agree with your general point: there is a tendency to group not least these deals together without distinction as confirmation of a pre-existing belief that the AI bubble is soon to collapse. The latter certainly might be true, but we should be careful about too quickly deciding what evidence supports it. I am inclined to strictly separate:
(a) the NVIDIA deal as a vendor subsidizing one of their largest clients, which perhaps signals market weakness;
from (b) the AMD deal as a non-market-leading vendor trying to entice a new enterprise client, who will only be able to use AMD's chips for serious training after significant (and risky) collaboration to improve their product offering.<p>This distinction is important to me because I see more concrete evidence for a possible material drop in NVIDIA's business short- to medium-term than a collapse of the sector as a whole. The chips act clearly shut them out unexpectedly from their second largest market and now it seems likely that Chinese chips will be competitive for training sooner than expected. Indeed, if Chinese AI firms are suddenly able to obtain even a roughly approximate product at considerably less cost, OpenAI will suddenly find themselves at a cost if not compute disadvantage to their Eastern competitors. It isn't a surprise, then, that OpenAI is now looking to reduce their present vendor lock-in with NVIDIA.<p>Overall, it's not great for the latter if they lose access to their second largest market, suddenly have viable competitors in their home market, and either lose some of a major client's business or have to significantly reduce pricing to retain it.
Nvidia is also investing hundreds of billions in OpenAI.
Yes. OpenAI is also investing in AMD. This was discussed yesterday on HN, following some very good explanation by Matt Levine at Bloomberg. This is a way for one party to reduce some risk, by enjoying some upside in the equity of the counterparty.<p>But this is not circular. Circular would be if I sell you an apple worth $0.25 for $2.00, and then you sell it back to me for $2.00, or other similar amount, and I get to mark all the apples in my inventory at $2.00 and show a huge profit (on paper). One can create variations of this blatant deal. Like I sell you some rubber for 10 times the market price, you make a balloon and then I buy the balloon for 10 times the market price. I may not have other balloons in my inventory, but plenty of rubber, and I show some nice profit. One can imagine other, fancier deals.<p>But in the case of AMD and NVidia, and OpenAI and Oracle, the direction is clear. OpenAI has a clear need for compute. They can buy it directly from NVidia and AMD, or indirectly from Oracle. They can buy it with hard cash (of which they don't have that much), or with their own equity, or some form of deal that offers the seller an upside in OpenAI's equity.<p>But there is not back and forth buying of the same item, or of rubber/balloons. All the deals seem legit. Is it possible that all the future compute will not be needed, because the AI craze will fizzle. It is, lots of things are possible. But that's general business risk.
> But there is not back and forth buying of the same item, or of rubber/balloons. All the deals seem legit.<p>Some, certainly, but the vendor-financing deals certainly look circular to the casual observer. Microsoft invests $X into OpenAI for a 51% (or whatever) stake, and that investment then goes straight back to Microsoft to pay for compute credits.<p>Or Nvidia invests[1] $100m into OpenAI, which OpenAI then turns around and pays back to Nvidia for compute.<p>The <i>majority</i> of the deals making the news are structured like this; maybe technically those aren't <i>actual</i> ducks[2], but they sure look, walk and talk like ducks.<p>Similarly structured deals are with Oracle. And Coreweave. And <i>everyone</i>.<p>It may not be a "circular" deal, but what do you expect people to call it when a company makes a deal to receive cash (not credit, but actual <i>cash</i>) from a vendor, and spends that cash with that vendor?<p>==========================<p>[1] I use this word loosely here - the investment is a commitment of 10x $10m tranches.<p>[2] I.e. circular deals.
> But this is not circular. Circular would be if I sell you an apple worth $0.25 for $2.00<p>When you draw a circle on a piece of paper do you put your pencil to the paper, start drawing a curve, stop and write the word FRAUD, and then complete the curve? Or do you just draw a circle?<p>I’m assuming that people are saying “circular” in that it looks like the money goes in a circle. (For one example) Nvidia invests in Lambda, Lambda buys GPUs from Nvidia, Nvidia leases GPUs back from Lambda, Lambda uses the revenue from leasing the GPUs to Nvidia to raise debt to buy more GPUs from Nvidia…
This is how financing works. When you buy a house, you get a mortgage from a bank. It is unusual to get a mortgage from a seller. It would feel a bit circular, right? But that is exactly what happens most of the time when people buy a car. They get a loan from the same company that sells them the car. Is that circular?<p>When you replace people with companies, the financing can become much more complex. The example you provided with Nvidia and Lambda seems quite reasonable to me. Here's an example that happens every day in the world of housing: banks lend money to house buyers. Then they package the mortgages and sell the resulting mortgage back securities. Then they take the money from the proceeds, and give more loans, and package them and create more mortgage back securities. Seems circular, right? But that's just how business is done. There is no Ponzi aspect to this, or fraud, or smoke and mirrors. It's just every day business. Nobody labels that as being circular.
When people buy a car they sometimes get a loan from the auto manufacturer’s financial services arm. What they don’t usually get are warrants struck at a penny for 10% of the manufacturer.<p>You sound like you know what you’re talking about. I only think I know what I’m talking about. Help me understand: What am I missing in the OpenAI / AMD deal that makes it non circular?
> You sound like you know what you’re talking about.<p>Honestly, I'm not an expert either, but I've run a company, and I can all but guarantee that credit_guy above really does not know what he is talking about.
Everyday business isn’t based on hype.<p>The AI startup valuation largely is. I feel it quickly becomes circular because people make projections purely on other projections since the world is too impatient to wait and find out.<p>A single hamburger store is never going to be projected to have a billion dollars of revenue because people understand the total addressable market. Doesn’t matter how good the burger is.<p>The AI stuff is too new that people don’t have a firm grasp on the costs and profit opportunities. They don’t really even know how to define the TAM. Too many unknowns. Entire classes of labor could be replaced by AI —- or perhaps not.<p>With little grounding, it quickly becomes a circle of hype.
> But that is exactly what happens most of the time when people buy a car. They get a loan from the same company that sells them the car.<p>No, they don't!<p>Serious <i>"Citation Needed"</i> here. They get a loan from a financial services company, that is a <i>separate company</i> from the automaker and/or dealership.<p>The certification and requirements for trading as a credit provider <i>will not be met</i> by neither the auto manufacturer nor the dealership.<p>> Here's an example that happens every day in the world of housing: banks lend money to house buyers. Then they package the mortgages and sell the resulting mortgage back securities. Then they take the money from the proceeds, and give more loans, and package them and create more mortgage back securities. Seems circular, right?<p>No, it doesn't! They make out new loans, sure, but they aren't loaning <i>you specifically</i> the proceeds from the sale of <i>your specific</i> mortgage-backed security!<p>If you happen to get a new loan from the sale of the MBS, it is impossible that <i>only you</i> get that loan, from the sale of an MBS that had <i>only your</i> existing loan.<p>Seriously, there's laws and regulations around this, and from what you say, with all due respect, it seems that you are unaware of these regulations.[1]<p>The only reason that these actually-circular deals can go on right now is because OpenAI (and other providers doing similar circular deals) <i>are not publicly traded</i>, and thus there are fewer regulations and even fewer enforcement of what little regulations there are for unlisted companies.<p>=================<p>[1] Why is your handle "credit_guy"? You don't appear to be familiar with the fact that credit providers are heavily regulated in all jurisdictions that we are talking about. I mean, you don't even need to know the specific regulations and certifications necessary, you just need to know things like a dealer cannot be a credit provider too.
It's ironic that you described how the 2008 financial crisis came to be to illustrate how “normal” this circularity is.
I don’t know what to tell you guy, but when people see money moving in a circle in a deal there is a good chance that “circular deal” might pop into their heads. Because it’s a deal that is shaped like a circle.<p>> Is that circular?<p>Doesn’t really seem so because at the end of the day the money goes from me to them. I don’t get my money back, I get a car in exchange for my money.<p>Also this deal didn’t begin with the manufacturer purchasing shares of me before offering me debt to buy a car from them.<p>>But that is exactly what happens most of the time when people buy a car.<p>Your car manufacturer leases your car back from you? And you use that revenue to raise debt to buy more cars from them? What manufacturer are you doing this with? What do you end up driving?
> Your car manufacturer leases your car back from you? And you use that revenue to raise debt to buy more cars from them?<p>Honestly, if this was possible people would be doing it (not that they are not - fleet services and rental fleet services do some pretty funky accounting sometimes, so I wouldn't be surprised at all if this sort of thing happened).<p>If this was possible, I'd be doing it.<p>> What manufacturer are you doing this with?<p>Good question. The minute an answer gets posted I'm going to have a really good side-hustle.<p>> What do you end up driving?<p>I presume, at the point that this is being done, there is no actual car involved, so nobody involved will be driving because there is no car <i>to</i> drive.
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Circular trading is a common technique used in Ponzi schemes to create the illusion of trading activity and to attract more investors.
HN community predictions so far are<p>2000s: cloud bubble
2010s: crypto bubble
2020s: AI bubble<p>Seems modern economy works different. I missed cloud and crypto and dont wana miss AI so im investing about 20% of my income.
This and stock buybacks make me question company valuations
Stock buyback is effectively just a dividend with a different tax implication: reducing the number of shares in circulation raises the ownership stake of the remaining shares
Stock buyback isn't a total scam as it seems, but it does mean "we can't figure out any productive use case for this cash in advancing R&D or scaling our business anymore" which is still pretty worrying
I suppose stock buybacks are similar to dividends in that regard
It’s more like, “the executives with lots of shares can’t see how to make the company grow, so they’ll just use profits to pump up the share price for their gain”.<p>I deeply feel buybacks shouldn’t be illegal but treated shamefully.<p>Instead of using profits to build up long term savings or fund R&D, they basically choose to do as little as possible.<p>There is no vision.
> Instead of using profits to build up long term savings or fund R&D, they basically choose to do as little as possible.<p>Isn't buying stock a form of long term savings? After all, they can always sell that stock when they want to "withdraw".<p>Sure, they may not get the same return as simply stashing it into a bank account, but it's also a statement of confidence in their future: "We are sure that our stock will outperform every other option there is for storing our money, because our long-term plans include extracting more profit from the market."
Realistically, if the execs think they can't do R&D then they can't. If they tried they would just waste the money.
Should companies never pay dividends?
Investments into vision can juice the stock price too. So they would do it if they had good realistic inspiring ideas
By that logic, any profit a company distributes to shareholders is worrying.
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.
> wonky unit economics, yes, but they're growing at ~100% YoY<p>Isn't this "losing money on each sale but making it up in volume"? Sounds like I heard that before and it did not turn out well.
The part that I think may have some credence is that it may be a way to prop up huge profit margins that may persist for longer than they would otherwise in lieu of further commoditization and competition.<p>If NVIDIA has a stake in the company, they are less likely to do something like start brewing inference chips in house with the help of the foundry partner and a provider of vanilla chip designs. The company also gets a huge cash injection that is somewhat contingent on <i>not</i> doing that, and hey, they have a fresh pile of cash for cutting edge chips so whatever, right? My first thought was that these deals had more to do with that than anything else.<p>That aspect may end up being a bit illusory in the end. But then again, Nvidia has been proven to be quite skilled at building out and defending their ecosystem, sometimes through ruthless means, so maybe it persists (and I'm not sure that's a good thing). China certainly isn't a threat to throw a wrench in this situation... the entire US geopolitical complex will ensure that is the case.
yes but their growth isn't driven by actual profits. It's a bet.
The weird part is the _impression_ that $100B is being paid to a hardware company for chips, when in fact zero dollars are being paid to a hardware company and instead they are relying on public markets to spike the stock price based on potential future orders as if the demand is real.<p>The only reason this works is if we are the useful idiots buying up the stock.
How are these "circular deals" different than Boeing (and other heavy civilian equipment makers) providing financing on purchases? My point: Is this simply clutching pearls over the AI/LLM bubble, or is there some substance to this concern?<p>And another: How does it compare against the new breed of Bitcoin treasuries, like Strategy (MSTR.OQ)? As I understand, Strategy uses secondary offerings to continuously see more shares, then uses the capital to buy more Bitcoin.
This happens also with automotive companies. Peugeot has its own bank, which lends money to people buying peugeots. The big difference: is not circular. The bank is a bank, the OEM building cars build cars.<p>The bank makes money by lending and cashing interest.<p>The car maker by selling for profit.<p>The money goes from bank to OEM, and not the way around, no circle.<p>I do not know the specifics of Boeing though.
Didn't Boeing's deals turn out to be bad?
My brain now reads Sam's face as an "AI generated" watermark.
Cyclical growth
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.
The OpenAI/AMD deal has an explicit AMD price target of $600. I don't see how it can be any clearer.
All I want to know is, is the bubble going to pop next week, next month, or two years from now?<p>Welcome to the casino! Please enjoy your stay, and remember: the house always wins ;)
how long until this thing pops?<p>my money is on 18 months
18 days
I sense a business opportunity here: betting on stocks! Maybe we can have a central market where people can exchange their money for bets. Maybe even sell their bet off before the due date.<p>We can call it a "stock market", or maybe even a "stock exchange". I expect I'll be able to get a patent on it if I prefix the name with "online", or suffix it with "on the internet".
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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.
That's not how taxes work. This isn't reddit, not everything is tax evasion.
Would profiting from these deals make your struggle a little less difficult?