Concerns Rise Over Potential Bubble in AI Sector Due to Circular Investment Deals
A series of interconnected deals among the titans of the Artificial Intelligence (AI) sector is stirring up concerns about a potential bubble. The circular investment pattern involves Nvidia investing in OpenAI, which in turn buys cloud computing from Oracle, which purchases chips from Nvidia, thereby creating a self-contained ecosystem of capital flow.
Recent instances of this pattern include:
- OpenAI’s deal with AMD, where OpenAI will purchase chips in exchange for up to 10% equity stakes.
- Nvidia’s commitment to invest up to $100 billion in OpenAI.
- Oracle spending $40 billion on Nvidia chips for OpenAI’s data centers.
- SoftBank, which owns a $3 billion Nvidia stake, is collaborating on the $500 billion Stargate project.
Economic experts caution that if AI productivity gains prove limited or delayed, a sharp correction in tech stocks, with negative knock-ons for the real economy, would be very likely. The tightening circle of investments among just a handful of companies has enormously increased valuations but also creates risks if any weak links emerge.
Source: NBC News