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The circular deal theory in AI involves companies like NVIDIA investing in OpenAI, which then uses the money to buy compute from NVIDIA, creating a cycle of revenue between the companies.
The partnership between NVIDIA and OpenAI involves a $100 billion investment to build AI infrastructure, potentially generating $400 billion in revenue for NVIDIA.
The AI economy might be headed for a collapse due to circular deals, as seen with recent agreements between AMD and OpenAI, and NVIDIA and XAI. This has led to widespread recognition of a potential bubble in the market.
The AI money bubble is a significant concern, with over a trillion dollars of incremental CapEx being announced, such as the recent OpenAI and Broadcom deal. This level of capital expenditure raises red flags about how it's being financed.
The circular nature of these deals, where companies like Nvidia invest in AI startups who then buy their chips, is raising fears of a bubble in AI.