Big AI's reliance on circular deals is raising fears of a bubble

AI giants like Nvidia, OpenAI and AMD are investing in one another, raising fears that a weak link could cripple the whole industry.

Nvidia plans to invest in OpenAI, which is buying cloud computing from Oracle, which is buying chips from Nvidia, which has a stake in CoreWeave, which is providing artificial intelligence infrastructure to OpenAI.

The AI boom that is revolutionizing how people live and work has become increasingly fueled by just a handful of companies turning to one another for the vast amounts of capital and computing power needed to drive their breakneck growth.

Some of those partnerships are worth up to hundreds of billions of dollars. Taken together, they have enormously increased the companies’ values, helping send U.S. stock indexes to new highs.

But as AI investing grows more insular, there is also a risk that the money flowing between these companies is creating a mirage of growth.

If the trend accelerates, some analysts warn, a weak link could threaten the viability of the whole industry — leaving an outsized mark on the U.S. economy.