AI Bubble: A Web of Investments and Dependencies

Will the AI bubble finally burst? Circular deals, where the same money seems to be flowing in a loop among a handful of powerful tech companies, are raising fears of an AI bubble. On the surface, these tech companies seem to be riding a wave of massive investments and exponential growth, with OpenAI at the center of the AI boom. ➡️Let's recap: - Microsoft has invested ~$13b in OpenAI - Microsoft is also OpenAI's biggest customer and primary cloud infrastructure provider through Azure - Softbank is invested in OpenAI, while OpenAI is buying chips from Nvidia - Softbank has deep investments in Nvidia as well - Nvidia has invested ~$100B in OpenAI - OpenAI has used these investments to buy computing power from Oracle - Oracle spends ~$40B buying chips from Nvidia - Nvidia is also invested in CoreWeave, a cloud computing company - CoreWeave provides AI infrastructure to OpenAI - OpenAI will soon invest in AMD, taking a 10% stake in Nvidia's biggest competitor ➿And around we go, in an endless loop that links these companies to one another as investors, suppliers, customers and partners. This would not be so concerning, if the booming global AI industry was not dependent on these companies. It has created a 'mirage of growth', which analyst believe is could burst and create a major ripple effect across industries. In my POV, this fragile construct is not unlike the subprime crisis, where financial institutions were building up a house of cards - one small flick could bring the whole thing down. For example, Newstree Research estimates that for every $10B OpenAI invests in Nvidia, the company receives $35B in chip purchases or lease - approx. 27% of Nvidia's annual revenue! The AI boom is relying on a handful of companies that are shifting money from one pocket to another. The transformative power of AI for the global business landscape is not in question, however the dependencies on these companies and the detrimental impact if this bubble bursts cannot be denied. What are your thoughts on the bubble? #AI #OpenAI #Nvidia #investments Image source: Bloomberg News Reporting