New Technology / Big Tech
Monitor Big Tech strategy, platform competition, corporate decisions and structural shifts across the global technology sector.
How Circular Deals Are Making the AI Bubble Even Worse
Summary
OpenAI has significantly invested in AI infrastructure, with global spending on data centers projected to exceed $1 trillion by 2030. Despite this massive investment, many AI initiatives remain unprofitable, raising concerns about the long-term viability of the sector. The technology industry is experiencing a race to build data centers, driven by the demand for artificial intelligence, yet profitability remains elusive for many companies.
Data centers are forecasted to consume up to 12% of all U.S. electricity by 2030, leading to rising operational costs. Companies are increasingly signing long-term supply contracts to manage energy consumption, which is growing faster than installed capacity. This surge in demand for energy and resources places additional financial pressure on the sector, complicating the path to profitability.
The current AI ecosystem operates through circular deals, where a small number of companies finance and consume from one another, sharing both growth and risk. This concentration of capital within a few dominant firms raises concerns about market saturation and the potential for technological stagnation. As a result, the perceived growth of the AI sector may mask underlying vulnerabilities.
Comparisons to the dot-com bubble are prevalent, as massive infrastructure investments in AI echo the patterns seen in the late 1990s. The reliance on external financing, which represents over 40% of total AI investment, indicates a fragile ecosystem that could collapse if growth targets are not met. The interconnectedness of these companies means that a significant correction could impact a broader segment of the economy.
Perspectives
Analysis of AI investment dynamics and economic implications.
Proponents of AI Investment
- Highlight massive investments in AI infrastructure
- Claim AI will drive significant economic growth
- Argue that circular deals support long-term investments
- Propose that AI technologies will transform various sectors
- Emphasize the importance of data centers in the digital economy
- Assert that AI companies are central to stock market indices
Critics of AI Investment
- Warn about the unsustainable nature of current investment models
- Question the profitability of many AI initiatives
- Accuse the sector of relying too heavily on external financing
- Highlight concerns over market saturation and technological stagnation
- Draw parallels to the dot-com bubble and its aftermath
- Point out rising operational costs impacting consumers
Neutral / Shared
- Acknowledge the rapid growth of AI-related spending
- Recognize the increasing importance of data centers
- Note the interconnectedness of major tech companies
Metrics
investment
around a trillion dollars USD
total AI deals made by OpenAI this year
This level of investment indicates a significant commitment to AI infrastructure.
OpenAI alone has made around a trillion dollars worth of AI deals.
spending
Global spending on data centers will surpass $1 trillion USD
projected spending on data centers driven by AI
This spending reflects the growing demand for AI infrastructure.
Global spending on data centers will surpass $1 trillion before 2030, driven by AI.
electricity_consumption
nearly 3% of global electricity
percentage of global electricity consumed by data centers
This highlights the significant energy demands of AI infrastructure.
the AI boom is sustained by a physical transformation dominated by data centers that already account for nearly 3% of global electricity consumption.
revenue_share
more than 80% of its revenue
percentage of Nvidia's revenue from data centers
This shows the critical role of data centers in Nvidia's business model.
in 2024, data centers already represented more than 80% of its revenue.
GDP_growth
about 1% point
contribution of AI-related spending to US GDP growth
This underscores the economic significance of AI investments.
their analysis shows AI-related spending boosted US GDP growth by about 1% point in the first half of 2025.
market_share
exceeds 20% of the global cloud services market
Microsoft's share of the global cloud services market
This indicates Microsoft's strong position in the cloud services sector.
Microsoft finances open AI and integrates its models into its own cloud, reinforcing its dominant position, which already exceeds 20% of the global cloud services market.
capital_invested
$120 billion USD
capital invested in AI startups
This reflects the scale of investment in the AI sector despite profitability concerns.
capital invested in AI startups exceeded $120 billion in 2024.
GDP_equivalence
12%
revenues of the 10 largest AI companies
This highlights the significant economic impact of these companies.
The revenues of the 10 largest AI companies are equivalent to nearly 12% of U.S. gross domestic product.
Key entities
Timeline highlights
00:00–05:00
OpenAI has made significant investments in AI infrastructure, with global spending on data centers expected to exceed $1 trillion by 2030. However, many AI initiatives remain unprofitable, raising concerns about the long-term viability of the sector.
- OpenAI has made substantial investments in AI infrastructure, reflecting a trend of rapid data center establishment across various regions. This surge indicates a competitive race within the tech industry
- Many AI initiatives are currently unprofitable and depend on anticipated growth to validate their costs. This situation raises concerns about the long-term viability of the AI sector
- A few companies dominate the AI market, controlling over 70% of global spending on advanced infrastructure. This concentration leads to circular financial arrangements that heighten both growth and risk
- The swift development of data centers is reshaping local economies, with some regions seeing these projects represent over 10% of new industrial investments. However, many of these facilities are not achieving their expected financial performance
- There are increasing worries that the AI boom is being artificially maintained through interconnected financial dealings among major tech firms. This trend raises the risk of systemic vulnerabilities within the industry
- AI infrastructure has significant energy requirements, with data centers consuming nearly 3% of global electricity. This growing demand highlights the importance of resource management as the sector expands
05:00–10:00
Data centers are projected to consume up to 12% of U.S. electricity by 2030, increasing operational costs for companies.
- Data centers are expected to account for up to 12% of U.S. electricity consumption by 2030, leading to higher operational costs for companies
- Many AI firms face profitability challenges as expenses often outpace revenue growth, necessitating over 40% of total AI investments to come from external financing
- Oracle has cautioned against excessive spending to attract AI clients, raising alarms about a potential AI bubble similar to the dot-com era, which underscores the risks of inflated expectations
- Circular financial arrangements among major tech companies create a fragile ecosystem, where each contract reinforces the last, increasing the risk of instability if growth targets are not met
- The concentration of a few large AI firms means that a market correction could adversely affect not only startups but also the wider economy, as these companies are significant players in pension funds and institutional investments
- The AI sectors growth is driven not just by technology but also by a financial system that supports ongoing investments, raising concerns about the sustainability of relying on a limited number of companies for expansion