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 concern with NVIDIA isn't a simple stock correction. Because a few tech giants represent such a huge portion of the S&P 500, a significant drop in NVIDIA's value could trigger a cascading failure, taking the entire global economy down with it.

When Japan repatriates its trillions in foreign assets, it will create a massive capital hole in US and European markets. Rather than allowing a painful credit contraction, the Fed and ECB will respond predictably: by printing more money to fill the gap, reinforcing the global inflationary cycle.

A condition called "fiscal dominance," where massive government debt exists, prevents the central bank from raising interest rates to cool speculation. This forces a flood of cheap money into the market, which seeks high returns in narrative-driven assets like AI because safer options can't keep pace with inflation.

During the 1980s bubble, Japanese firms engaged in "Zytec," using profits from financial speculation to boost reported earnings. This created a circular feedback loop: rising share prices increased their ability to raise cheap capital for more speculation, which in turn fueled share prices even higher, detaching them from operational reality.

The global economy's dependence on AI has created a massive concentration of risk in NVIDIA. Its valuation, exceeding the entire German stock market, makes it a single point of failure. A significant drop in its stock—which could still leave it overvalued—would have catastrophic ripple effects with nowhere for capital to hide.

As the first major economy to reach its debt limit, Japan's bond market is seizing up, forcing capital into riskier assets like equities. This dynamic of a bursting sovereign bond bubble inadvertently fueling the real economy is a likely preview of the path the United States will eventually follow.

A critical but overlooked risk for the U.S. credit market is rising interest rates in Japan. Japanese banks are major buyers of AAA-rated Collateralized Loan Obligations (CLOs). If domestic yields become more attractive, they may pull back, removing a significant source of demand that underpins the entire leveraged loan ecosystem.

International buyers want exposure to high-performing US companies like NVIDIA but are simultaneously hedging against a declining US dollar. They are separating the appeal of American corporate exceptionalism from growing concerns about US sovereign risk and currency depreciation.