The Web of Circular Financing: Lessons from the Dot-Com Era and the AI Boom

Introduction: The Nature of Circular or Vendor Financing 

Circular financing, sometimes known as vendor financing, occurs when companies fund their own customers to maintain demand and market growth. Instead of waiting for organic buyers, a firm provides loans, shares, or discounts so that others can purchase its products or services—creating a self-sustaining but potentially fragile cycle. This practice can inflate valuations and give the illusion of prosperity because the same pool of capital circulates within a closed network of companies. It’s like Starbucks lending money to customers so they can buy more coffee, thus “proving” that demand is booming—when in reality, the company is financing its own sales. 

The Current AI Financing Web 

In today’s AI industry, we see this circular pattern vividly among the world’s biggest players: OpenAI, Nvidia, AMD, Microsoft, Google, and Oracle. Each of these companies is simultaneously a customer, supplier, investor, and partner of the others: 

• Nvidia invests in OpenAI, while OpenAI buys Nvidia’s GPUs to train its models. 
• AMD gives OpenAI stock warrants, making OpenAI both an investor and a buyer of AMD chips.
• Microsoft and Google provide cloud infrastructure for OpenAI’s models while also investing billions in its growth. 
• Oracle partners with OpenAI to host workloads on its servers while entering multibillion-dollar “AI collaboration” deals. 

 This closed loop makes the AI economy look like a vibrant ecosystem of growth—but much of the money is simply moving in circles. Analysts call it round-tripping: capital is recycled to inflate valuations, creating the illusion of continuous expansion.

Visual Diagram: illustrates how OpenAI sits at the center of a financial web, linked by arrows to Nvidia, AMD, Microsoft, Google, and Oracle, each both supplier and investor. The circular arrows symbolize capital looping endlessly within the same ecosystem. 

Echoes from the Dot-Com Bubble 

The article draws parallels between this AI frenzy and the dot-com bubble of the late 1990s. Then, telecom giants such as Cisco, Lucent, and Nortel financed startups to buy their networking equipment. These startups used borrowed money to make massive orders, which propped up stock prices—until the illusion of demand collapsed. When the market corrected, telecom firms were left with unpaid debts and unsold inventory. Like that earlier era, today’s AI sector shows: 

• Exaggerated expectations of revolutionary technology. 
• Cross-financing that masks true demand. 
• Skyrocketing valuations without clear profitability. 

However, there are key differences: 

• Big Tech firms now (Microsoft, Nvidia, Google) have far stronger balance sheets than the speculative startups of the 1990s. 
• AI technology, unlike early internet tools, already delivers some tangible productivity benefits, though limited in scale. 

A Bubble or a Transformation? 

While some analysts warn that this could be “the largest and most dangerous bubble in history,” others argue that today’s AI investments are laying the groundwork for future infrastructure—comparable to building the internet backbone before its true value was realized. Still, the question remains: how much of this growth is genuine innovation versus financial engineering? 

Conclusion 

Circular financing has become both the engine and the illusion of the modern AI boom. The interdependence of OpenAI, Nvidia, AMD, and their peers has created a dazzling but potentially unstable ecosystem reminiscent of the dot-com age. The lesson from history is clear: when money circles too tightly among insiders, the illusion of endless growth can collapse just as suddenly as it was created. 

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Yet another OpenAI financial entanglement is renewing fears of a repeat of the dot-com era