Analysts Question “Circular Financing” as Nvidia’s $100 Billion Investment in OpenAI Raises Concerns Over an AI Bubble

Nvidia’s recent $100 billion investment in OpenAI raises alarm over a potential AI financial bubble. Investors are becoming wary, as Nvidia engages in “circular” financing—an investment model where it funds its own customers, suggesting inflated demand for AI services. This can distort revenue insights, reminiscent of previous tech bubbles where such practices led to significant market downturns. Notably, Nvidia holds stakes in CoreWeave, enhancing their financial leverage and allowing easier access to low-rate debt for projects. Analysts warn that Nvidia’s circular dealings may echo past failures, where companies like Cisco lent excessively to customers, leading to severe financial consequences when the market collapsed. Additionally, Nvidia’s leasing agreements for AI chips may shift depreciation risks to them, compounding vulnerability. While projections suggest potential returns from these investments, the growing concerns of inflated valuations in the AI sector could foreshadow significant market corrections ahead.

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