OpenAI and Nvidia’s $1 Trillion Circular Investment AI Bubble Fears
OpenAI and Nvidia’s $1 Trillion AI Web Raises Fears of a Circular Investment Bubble
Synopsis:
- Nvidia invests up to $100 billion in OpenAI to fuel massive AI data-center expansion.
- OpenAI signs similar multi-billion deals with AMD and Oracle, deepening market interdependence.
- Analysts warn of “circular financing” inflating the trillion-dollar AI boom.
- Companies argue these partnerships are necessary to meet soaring AI demand.
- Estimated Reading Time: 4 min Read
Two weeks ago, Nvidia Corp. committed as much as $100 billion to OpenAI to help build colossal AI data centers capable of powering an entire city. In return, OpenAI agreed to fill those facilities with millions of Nvidia chips — a move immediately criticized as “circular” for recycling investment back into the investor’s ecosystem.
Undeterred, the ChatGPT developer signed another sweeping deal this week, partnering with Advanced Micro Devices Inc. (AMD) to deploy tens of billions of dollars’ worth of its processors. As part of the arrangement, OpenAI is positioned to become one of AMD’s largest shareholders.
Never before has so much money been funneled so quickly into a technology still struggling to prove its profitability. Many of these vast investments trace directly back to Nvidia and OpenAI, whose intertwined transactions have stirred concerns that the trillion-dollar AI boom may be propped up by overlapping financial loops stretching across debt, equity, real estate, and energy markets.
The two firms ignited the AI frenzy three years ago and have sustained it through increasingly complex partnerships with cloud providers, AI developers, and startups. Analysts now fear these overlapping alliances are inflating valuations and tying the fates of numerous tech players together. OpenAI alone has sealed computing agreements with Nvidia, AMD, and Oracle Corp. potentially surpassing $1 trillion in total commitments — even as the startup burns through cash and may not turn cash-flow positive until the decade’s end.
“If we end up in an AI bubble and it pops, this deal might be one of the breadcrumbs,” said Brian Colello of Morningstar, referring to Nvidia’s investment in OpenAI. “If things go bad, circular relationships might be at play.”
Much of the AI boom’s momentum has been driven by Nvidia’s aggressive deal-making. The chip giant has poured billions into dozens of AI startups, many reliant on its GPUs to build their systems. OpenAI, though to a smaller degree, has mirrored that strategy — investing in startups that operate atop its models. But as development costs soar, deal sizes have ballooned to historic levels.
The day after the $100 billion Nvidia-OpenAI pact, OpenAI revealed a separate $300 billion collaboration with Oracle to build new U.S. data centers. Oracle, in turn, is spending billions buying Nvidia chips for those facilities — sending revenue back to the same supplier funding the expansion.
Concerns deepened Tuesday after reports showed Oracle’s cloud margins far thinner than expected. Internal documents cited by The Information indicated its cloud gross profit was just 14 cents per dollar of sales, despite generating $900 million in revenue renting Nvidia-powered servers last quarter. The disclosure dragged down Oracle stock and weighed on the wider market.
Later that day, insiders said Nvidia intends to invest up to $2 billion in Elon Musk’s xAI, part of a $20 billion round split between $7.5 billion in equity and $12.5 billion in debt. The financing is structured through a special-purpose vehicle (SPV) designed to purchase Nvidia processors, which xAI will then lease over five years.
Another example is CoreWeave Inc., a breakout “neocloud” firm this year. Nvidia took a 7% stake to bolster its IPO, then agreed to buy $6.3 billion in cloud services from CoreWeave, which rents access to Nvidia GPUs. OpenAI received $350 million in CoreWeave equity before the IPO and later expanded its cloud contracts with the company to as much as $22.4 billion — once again binding the trio even tighter.
Inside the industry, leaders defend these arrangements as necessary to meet unprecedented demand. AMD CEO Lisa Su described the OpenAI alliance as a “virtuous, positive cycle,” while OpenAI President Greg Brockman said it will require an “industry-wide effort” across the AI supply chain to sustain ChatGPT’s growth.
In Washington, officials have largely avoided interference. “It’s up to them,” said White House AI and Crypto Czar David Sacks. “We want American companies to be successful.” The Trump administration remains tied to the ecosystem via its Intel Corp. holdings and potential revenue-sharing from Nvidia and AMD chip exports to China.
Yet veteran analysts see echoes of the dot-com bubble. Paulo Carvao, senior fellow at the Harvard Kennedy School, noted that “in the late 1990s, circular deals inflated perceived growth. Today’s AI firms have real products and customers, but spending is still outpacing monetization.”
A Nvidia spokesperson said the company “does not require any of the companies we invest in to use Nvidia technology.” CEO Jensen Huang reiterated on CNBC that partners can use funds however they choose. OpenAI declined to comment.
Even so, the spending dwarfs past tech eras. Sam Altman has said OpenAI expects to invest “trillions” to build global AI infrastructure — an ambitious target for a firm yet to show profit. To finance it, OpenAI plans to combine venture capital, debt, and a growing number of strategic partnerships with companies eager to attach themselves to its momentum.
Earlier AI startups leaned on giants like Microsoft, Amazon, and Google, whose cloud services underpinned early growth. Now firms such as OpenAI and xAI are following their lead — tapping debt markets for billions to fund new infrastructure.
“Altman has the power to crash the global economy for a decade or take us to the promised land,” wrote Stacy Rasgon of Bernstein Research. “Right now, we don’t know which is in the cards.”
A glimpse of the scale appeared in Abilene, Texas, where OpenAI and Oracle are building the first Stargate AI Data Center, a sprawling facility still under construction. At a recent developer event, Altman acknowledged his company’s steep costs: “One day we have to be very profitable, and we’re confident and patient that we’ll get there. But right now, we’re in a phase of investment and growth.”
Meanwhile, Nvidia, the world’s most valuable company at $4.5 trillion, shows no sign of slowing. It participated in 52 venture deals in 2024 and 50 more by September 2025, according to PitchBook. CFO Colette Kress said at a Goldman conference that Nvidia aims to invest in “the most strategic parts of the ecosystem.” The firm has even agreed to absorb unused CoreWeave capacity to stabilize its partners.
CoreWeave CEO Michael Intrator dismissed concerns: “When Microsoft buys infrastructure to deliver Copilot to clients, I don’t care what people say about circular financing — there are real end users consuming it.”
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About OpenAI
OpenAI is a U.S.-based artificial intelligence research and development company best known for creating ChatGPT, one of the world’s most widely used generative AI platforms. The company has become the central player in the trillion-dollar AI boom through a series of massive partnerships and funding deals with leading technology firms. It recently secured up to $100 billion in backing from Nvidia Corp. to build advanced AI data centers, and signed additional multi-billion-dollar agreements with AMD and Oracle to deploy high-performance chips and cloud infrastructure.
Led by CEO Sam Altman and co-founder Greg Brockman, OpenAI’s strategy centers on expanding computational capacity to support ChatGPT and future AI models. Despite burning through cash and remaining unprofitable, the company is driving unprecedented investment in AI infrastructure, influencing markets from semiconductors to real estate, and standing at the core of what analysts describe as a potentially circular trillion-dollar AI economy.
Featured Image: NDTV
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