A group of AI companies is passing the same $1.4 trillion back and forth to make the industry look more successful than it actually is.
The current boom is built on a circular financing loop where a few major players rotate capital to inflate each other's valuations and revenues. OpenAI acts as the single point of failure for this entire financial network. We are told that the AI revolution is driven by organic customer demand and useful products. This analysis suggests it is actually a house of cards similar to the telecom crash of 2000. If one major company in this loop fails, the entire $1.4 trillion ecosystem could vanish overnight.
The AI Circular Economy: Systemic Risk, Vendor Financing, and the Keystone Problem
SSRN · 6672478
This paper identifies and maps a structural phenomenon in the artificial intelligence industry: a self-reinforcing system of circular financing in which the same pool of capital rotates continuously among a small group of companies, principally Nvidia, OpenAI, Microsoft, Oracle, AMD, CoreWeave, SoftBank, and xAI, creating the appearance of robust revenue growth, soaring valuations, and unprecedented infrastructure demand. We identify seven distinct circular financing loops, totalling over $1.4 t