| AI’s web of circular deals |
| Here’s one way to think about artificial intelligence: Never before has so much been spent so rapidly on a technology that, for all its potential, remains largely unproven as a way to make money. Often, these investments can be traced back to two leading firms: Nvidia and OpenAI.
The recent wave of deals and partnerships involving the two are escalating concerns that an increasingly complex and interconnected web of business transactions is artificially propping up the trillion-dollar AI boom.
The latest:
- Two weeks ago, Nvidia agreed to invest as much as $100 billion in OpenAI to help the leading AI startup fund a data-center buildout so massive it could power a major city. OpenAI in turn committed to filling those sites with millions of Nvidia chips.
- OpenAI was at it again on Monday, inking a partnership with Advanced Micro Devices to deploy tens of billions of dollars’ worth of its chips. As part of the tie-up, OpenAI is poised to become one of AMD’s largest shareholders.
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The companies, which ignited an AI investment frenzy three years ago, have been instrumental in keeping it going by inking large and sometimes overlapping partnerships with cloud providers, AI developers and other startups in the sector.
OpenAI alone has now struck AI computing deals with Nvidia, AMD and Oracle Corp. that altogether could easily top $1 trillion. Meanwhile, it’s burning through cash and doesn’t expect to be cash-flow positive until near the end of the decade.
“If we get to a point a year from now where we had an AI bubble and it popped, this deal might be one of the early breadcrumbs,” Brian Colello, an analyst with Morningstar, said about Nvidia’s investment in OpenAI. “If things go bad, circular relationships might be at play.” — Emily Forgash and Agnee Ghosh |
