A small group of tech giants has invested over $1 trillion in a technology that is failing to generate profits

Artificial intelligence (AI) is booming, but behind the hype lurks a threat of a financial bubble. There is rising unease about how a small group of companies fund the technology though circular deals that boost their market value, which is far greater than the profits the industry generates.

OpenAI, the owner of ChatGPT, has secured AI computing agreements with Nvidia, AMD and Oracle that could together exceed $1 trillion in value. Nvidia, which describes itself as the world’s leader in AI computing, took part in 52 venture investment deals involving AI companies in 2024, and has completed 50 more by the end of September last year.

Some experts warn that the deals are actually a small group of closely linked companies that invest in one another, creating what they describe as circular financing.

One example cited involves Nvidia announcing a $100 billion investment in OpenAI, followed by OpenAI confirming a $300 billion data center deal with Oracle. Oracle then spent about $40 billion on Nvidia chips for those facilities, completing a financial loop.

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OpenAI needs $200bn to continue losing money – HSBC

These deals generate large revenue figures on paper, but net income remains far smaller, according to the findings, which draw parallels with the dot-com era, when companies bought services from one another to inflate balance sheets before the bubble burst.

At its peak last October, Nvidia’s market cap surpassed $5 trillion, bigger than Germany’s annual economic output at the time, the report points out.

AI executives largely reject that comparison with the dot-com bubble. Nvidia’s chief executive said of his company’s investment in Elon Musk’s xAI, “The only regret I have is I didn’t give him more money.” 

In its report last November, HSBC warned that the AI industry needs hundreds of billions in investments by 2030 as companies in the sector continue to lose money.