AI's Circular Money Machine: A Bubble in the Making?

The artificial intelligence sector is characterized by extensive interdependencies between key companies like Nvidia and OpenAI. These firms are not only customers but also investors in one another, creating a sophisticated web of financial relationships that analysts are scrutinizing closely. This complex structure has led to suspicions of a 'circular money machine,' where investments may be recirculating to artificially inflate growth.

Comparisons are being drawn to the dot-com bubble era, where companies like Yahoo and Cisco experienced rapid growth fueled by financialization. Startups raised IPO money, which was then spent on advertising or equipment, creating a seemingly robust economy. However, when the IPO market faltered, this artificial demand collapsed, revealing the unsustainable nature of the revenue streams.

While Nvidia and other AI companies undeniably have real businesses and profits, the extensive financial entanglements raise questions about the long-term sustainability of their current valuations. The concern is that, similar to the past, the AI boom's impressive revenues might not be as organic or resilient as they appear, potentially risking a bubble if market confidence wavers.