The incredibly vast sums of cash that Bay Area executives are now willing to throw into artificial intelligence tech have created an eyebrow-raising trend: the “circular” mega-deal.
Take San Francisco’s OpenAI, which is staking its claim at the centre of the nascent AI industry with a flurry of recent deals. Over the past month, it has roped in chipmaking juggernauts like Santa Clara’s Nvidia and Advanced Micro Devices, as well as data centre giant Oracle and upstart CoreWeave.
The deals are so vast that they defy comprehension — the Financial Times put the company’s recent commitments at north of $1 trillion – and they’re making public companies’ stock prices jump. Stock analysts dub some of these agreements “circular,” because investment money is flowing between companies that also buy from or sell to one another. The worry then is that such deals might prop up or overhype a bad business.
Here’s one indicatively tangled pathway through the morass of companies. Nvidia is investing billions in and selling chips to OpenAI, which is also buying chips from and earning stock in AMD. AMD sells processors to Oracle, which is building data centers with OpenAI — which also gets data center work from CoreWeave. And that company is partially owned by, yes, Nvidia. Taken together, it’s a doozy. There are other collaborations and rivalries and many other factors at play, but OpenAI is the many-tentacled octopus in the middle, spinning its achievement of ChatGPT into a blitz of speculative investments.
UPDATE 191125: Anthropic is at the heart of the latest billion-dollar circular AI investment bonanza - What do you get when you combine Anthropic, Microsoft, and Nvidia? A bubble that blows itself!
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