Circular financing ain’t what it used to be
Nvidia is falling. The mood has changed.
Nine months ago, on September 10, 2025 Oracle announced what seemed to many to be the deal of the century! A $300 billion deal with OpenAI.
The market went wild. Oracle stock briefly went up by 43% (and ultimately even a bit higher). Larry Ellison’s net worth briefly leapt by $100 billion. The Wall St. Journal gushed:
The whole thing never made sense though. The next morning, inn an essay called Peak Bubble I warned that
Yet Oracle continued to rise!
But not for long. Its stock stood at $307 per share at the close of trading on September 10, and briefly closed as high as $328 ten days later. Now, as I write this, it’s hovering around $120.
In the intervening nine months, the market has grown wary of all this circular financing stuff. Mocking illustrations like this one (from yesterday) have become widespread:
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All of which brings me to the present. Yesterday, news broke that Nvidia is considering offering a $250 billion backstop for an OpenAI-led data center. Which led last night to considerable skepticism
and this morning led to a dramatically different reaction from the market, nothing like the bounce like Oracle had back in September. Instead, in the first couple hours of trading Nvidia is down over 4.5%:
The market isn’t reading the latest potential Nvidia-OpenAI deal as good news; they are reading it as desperation. As one investor put it to me in an email this morning, “[the deal] seems incredibly desperate by both parties. Two drunks leaning on each other to stand up.”
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Meanwhile, Apple, the butt of jokes for a while because “it didn’t invest in enough AI” just overtook Nvidia
and SpaceX, which tried to position itself as an AI company is in free fall, dropping over 3% today, and by over 25% in the last month, more than 50% from its June high of 225:
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Meanwhile, creditors are getting pretty leery of the whole thing, too, as Axios just reported:
And then there’s all the off-balance-sheet financing that is coming to light. And the sudden need for so-called “creative financing”. If that’s not a warning sign, I don’t know what is.
The GenAI boom hasn’t been sustained by profits; it has been sustained by hope and circular financing. That may no longer be enough.
Update: Matt Stoller just made an important additional point I should have made:
Circular financing will become a circular firing squad
What's the matter with AI? This:
I just exchanged several texts with the nicest person. She works as a vet assistant and my dog has been ill. Naturally, I was concerned. It felt great to be consoled by someone so empathetic. Usually the lab techs are hurried, even a bit irritable, with customers, because, naturally, they're busy and under pressure. That's life in the working world. We're human. Nobody's perfect. I get it!
But this young woman was different. She really understood. She really cared. I even thanked her, saying how happy I was to be talking to a real person, and that I hoped my longtime vet practice would keep it that way. No AI for me or this small community!
She immediately texted back, with her customary concern over my concerns, that she was in fact AI.
Again, THIS is what's the matter with AI. All the financial shit. . . who cares unless you're an investor? For ordinary people THIS sort of exchange is just another insult to our self-esteem. And to think how hard I tried to brighter HER day, cracking jokes, thanking her, and so on. . ..
The embarrassment still lingers, which is why I'm writing this. Maybe later I'll be able to laugh about it over a beer. . . .but I think not. Why? Because I've figured out something important. At last it hit me what we're REALLY doing to humanity. And it's not about money, potential job losses, cancer cures backfiring, or AI getting smarter than us and killing us all.
It's about the fundamental dishonesty baked into this whole nightmare, beginning with the obvious lie that claims it's "intelligent." Programming a machine to tell a human being ("Hi, I'm your lab assistant") that it is also a human being, with real feelings, . . . To me that far more pernicious.
If the voice sounded robotic, like Hal in "2001, A space Odyssey," it wouldn't be so awful. But AI is predicated on the most corrosive deception that's ever been perpetrated on H. sapiens.
And to think we are doing this TO OURSELVES just so a few already rich people can make themselves richer still.