MELBOURNE: Imagine a company that sells you equipment, invests money in your business, and then rents back what you build with it. It’s your supplier, your investor and your customer all at once.
That’s known as circular financing.
Many artificial intelligence (AI) companies, including Microsoft, Amazon, Google and Nvidia, have adopted a version of this opaque method of financing.
A chip supplier invests in a customer such as a data centre builder, the customer spends the money on the supplier’s chips, and both companies report growth.
Guess WordCrack the word, one row at a timeBuzzwordCreate words using the given lettersMini SudokuTiny puzzle, mighty brain teaserMini CrosswordSmall grid, big challengeWord SearchSpot as many words as you can Show More Show LessOne central bank analysis found that 55.2 per cent of investments into AI firms came from other AI firms.
What’s not clear to investors or the market is how much of this AI boom is being driven by real, end-user demand – and how much might be a bubble.
IT ALL COMES BACK TO NVIDIA
Take Nvidia. The world’s leading chipmaker is investing in ChatGPT owner OpenAI to support data centres filled with Nvidia chips.
Nvidia will invest US$30 billion in a private funding round in OpenAI and provide a guarantee of up to US$105 billion for an OpenAI data centre in Ohio, as well as investing in the company building it.
That helps OpenAI to remain Nvidia’s best customer, but it also raises the question: Is the chipmaker propping up the market?