Commodification of Intelligence: Good, Bad, and Ugly Circular AI Deals
The article examines the trend of 'circular' financing deals in the AI industry, where companies invest in each other to fuel growth. It argues that this reflects the commodification of AI compute power rather than just a speculative bubble.
Why it matters
Understanding these financial structures is crucial for assessing the long-term stability and maturity of the AI sector.
Every few months, and especially this week, the AI space gets criticized for circular financing and customer relationships. OpenAI raises money from Microsoft, spending it on Microsoft servers; Nvidia backstops CoreWeave debt, and CoreWeave buys Nvidia GPUs. "The bubble is about to burst!" analysts scream.
Analysts point to dot-com deals with circular investments in 1999, arguing that this is all bound to happen again [1] [2] . They are wrong.
Circular deals are more interesting than "good" or "bad." They show the AI industry isn't just maturing, but modifying the idea of "AI" to something that is less a technology product, and more a commodity. Imagine that - intelligence available like electricity, and the underlying financial system structured accordingly.
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