Major tech companies are investing in their own customers, creating a self-reinforcing loop of capital that inflates demand and valuations. This dangerous practice mirrors the vendor financing tactics of the dot-com era (e.g., Nortel), which led to a systemic collapse when external capital eventually dried up.

The AI boom is fueled by 'club deals' where large companies invest in startups with the expectation that the funds will be spent on the investor's own products. This creates a circular, self-reinforcing valuation bubble that is highly vulnerable to collapse, as the failure of one company can trigger a cascading failure across the entire interconnected system.

Top AI labs like Anthropic are simultaneously taking massive investments from direct competitors like Microsoft, NVIDIA, Google, and Amazon. This creates a confusing web of reciprocal deals for capital and cloud compute, blurring traditional competitive lines and creating complex interdependencies.

Tech companies are acquiring essential AI hardware through complex deals involving stock warrants. The deal announcement inflates the chipmaker's stock, giving the warrants immediate value. This value is then used as capital to complete the original purchase, creating money "out of nothing."

Current AI investment patterns mirror the "round-tripping" seen in the late '90s tech bubble. For example, NVIDIA invests billions in a startup like OpenAI, which then uses that capital to purchase NVIDIA chips. This creates an illusion of demand and inflated valuations, masking the lack of real, external customer revenue.

Seemingly strange deals, like NVIDIA investing in companies that then buy its GPUs, serve a deep strategic purpose. It's not just financial engineering; it's a way to forge co-dependent alliances, secure its central role in the ecosystem, and effectively anoint winners in the AI arms race.

Nvidia's earnings call revealed its multi-billion dollar investment opportunities in OpenAI and Anthropic are non-binding letters of intent. This suggests the supposed "round-tripping" of capital in the AI ecosystem is built on optional, handshake-like deals, not guaranteed commitments, adding a layer of hidden risk.

The memo flags deals where money is "round-tripped" between AI players—for example, a chipmaker investing in a startup that then uses the funds to buy its chips. This practice, reminiscent of the 1990s telecom bust, can create illusory profits and exaggerate progress, signaling that the market is overheating.

Leaders from NVIDIA, OpenAI, and Microsoft are mutually dependent as customers, suppliers, and investors. This creates a powerful, self-reinforcing growth loop that props up the entire AI sector, making it look like a "white elephant gift-giving party" where everyone is invested in each other's success.