AI may change the world. But that does not mean every type of financing being used to build it makes a good investment.
Financing the AI buildout is beginning to look less like a supply chain and more like a circle. Chipmakers invest in AI companies. AI companies sign long-dated commitments with developers of AI data centres. The developers then borrow against these commitments to buy chips. The guarantee that Nvidia has reportedly offered to a data-centre project proposed by OpenAI is a useful illustration of this circularity.
The same handful of names repeatedly appear as customer, supplier, investor and guarantor. The more circular the financing becomes, the less independent each apparent layer of support really is.
Capital may enter the ecosystem at several points, but repaying today’s borrowing ultimately depends on companies such as (the unprofitable and unrated) OpenAI and a small group of other AI customers turning extraordinary quantities of compute into cashflows.
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