"Nvidia's announcement earlier this week that it is investing $100 billion into OpenAI to help fund its massive data center build out has added to a growing sense of unease among investors that there is a dangerous financial bubble around AI, and that the revenues and earnings math underpinning the valuations of both public and private companies in the sector just doesn't add up."
"In past technology bubbles, revenue "roundtripping" and tech companies financing their own customers have exacerbated the damage when those bubbles eventually popped. While the share of Nvidia's revenues that are currently being driven by such financing appears to be relatively small, the company's dominance as the world's most valuable publicly-traded company means that its stock is "priced for perfection" and that even minor missteps could have outsized impact on its valuation—and on financial markets and perhaps even the wider economy."
Nvidia announced a $100 billion investment in OpenAI to help fund massive data center build-out. The company has engaged in a series of "circular" deals in which it invests in or lends money to its own customers, potentially inflating perceived demand for AI. Vendor financing and revenue roundtripping previously amplified damage in past tech bubbles. Many Nvidia investment and financing deals are individually too small to meet reporting thresholds, yet collectively may be significant. Multiple interlocking investments create complex circularity between Nvidia, cloud providers, and AI companies, making it difficult to quantify true demand and financial exposure.
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