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IMO this looks largely like another circular investment. Amazon's investment is tied to OpenAI using AWS for their Frontier product and I assume Nvidia's condit

IMO this looks largely like another circular investment. Amazon's investment is tied to OpenAI using AWS for their Frontier product and I assume Nvidia's conditions are that OpenAI continue buying hardware from them. Then there's SoftBank though given that those are the same guys that invested heavily in WeWork, I assume this is just very brash bullishness on their part. From my perspective, I hope that OpenAI survives and can pull of their IPO but I just have that nagging feeling in my gut that their IPO will be rejected in much the same way that the WeWork IPO was rejected. On the one hand you can look at these companies investing and take it as a signal that there is something there (in OpenAI) that's worth investing in. On the other hand all these companies that are investing are basically getting that investment back through spending commitments and such and are just using OpenAI as a proxy for what is essentially buying more revenue for themselves. When their IPO hits later this year I hope that it's the former case and there's actually some good underlying fundamentals to invest in. But based on everything I've read, my gut is telling me they will eventually implode under the weight of their business model and spending commitments.

system2 8mo ago
I am expecting OpenAI stock to be the most volatile in history. The first 3-6 months will be fun.
- leonflexo 8mo ago
  How far the volatility ripples out will give us a real look into just how self-reinforced the financials truly are.
ChadNauseam 8mo ago
> On the one hand you can look at these companies investing and take it as a signal that there is something there (in OpenAI) that's worth investing in. On the other hand all these companies that are investing are basically getting that investment back through spending commitments and such and are just using OpenAI as a proxy for what is essentially buying more revenue for themselves. I don't understand how this is some kind of cheat code. Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back".
- rafaelmn 8mo ago
  In exchange for 100$ of your stock AND making your revenue numbers look insane for the next cycle ? Also Nvidia margins are waaay higher than 20%
- Alex3917 8mo ago
  For both Amazon and Nvidia, their marginal costs are probably much lower than their fixed costs.
- SecretDreams 8mo ago
  > I don't understand how this is some kind of cheat code. Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back". What if the product only costs you $20 to produce?
  - a_victorp 8mo ago
    Or if the stock is not actually worth $100
- hirako2000 8mo ago
  That's like giving them* $20. And inflate your revenue by $80. Laws on competition make this kind of arrangements illegal, so you would have to exerce influence and have the invested in company pretends you happen to have been picked among competitors. In any case the SEC will be focused on whether the filings aren't made up to fraud investors, so they could reject the IPO, of the invested in company. Your own entity also is at risk. We all know MS gets away with it, they have good legal goons who find way to make all of it appears fair with regards to the law.
  - GolfPopper 8mo ago
    >they have good legal goons who find way to make all of it appears fair with regards to the law I thought it was more that the legal goons delay the final judgement until Microsoft can eventually find someone they can (technically legally) bribe to drop the case?
bandrami 8mo ago
It's not "continue" buying as much as this is NVIDIA fronting the money for (most of) the hardware OpenAI has already ordered from them. It's like borrowing rent money from your drug dealer.
- nelsonic 8mo ago
  Great analogy. ;-) Doubt Jensen sees himself as a “dealer” but considering the vendor lock-in and margins, he pretty much is the Tony Montana of Ai Chips. It’s nuts that this type of financing is legal.
  - Aperocky 8mo ago
    It is legal because Jensen isn't selling drugs, payday loans are legal too!
    - lotsofpulp 8mo ago
      It’s legal because both sides have armies of lawyers and are voluntarily entering into contracts where each party gets consideration. How someone can compare the above situation to a person getting a payday loan to put a roof over their head or food on their plate is beyond me. The “it’s like <insert wild and inappropriate analogy to stoke emotion>” is a tired trope.
      - bandrami 8mo ago
        Come on, calling a round of vendor financing (which is what the NVIDIA money is) "funding" is eggregiously misleading. The only new money entering the sector from this is SoftBank's stake.
        lotsofpulp 8mo ago
        They might have dressed up the wording, but the details are all there for anyone who wants to objectively look at the deal. It is a group of two executives making a non coerced deal and disclosing the required information to investors. Might be a stupid gamble, but it's not akin to a loan shark shaking down a hungry, cold person for life's essentials.
max51 8mo ago
The "circular investment" is mostly start up companies using their stocks instead of cash to pay for server hardware and cloud computing. There is a few extra steps in between that make things look weird and convoluted, but the end results is really just big companies giving hardware and getting shares of ai companies in exchange for it.
- dangus 8mo ago
  I think you’re just describing how it’s circular. It’s like Toys R Us not having enough money to pay Mattel for Barbie dolls and telling Mattel they can have partial ownership of the company if they just supply them with some more toys. But the problem is that Toys R Us is spending $15, 20, or maybe even $50 (who knows?) to sell a $10 toy. Toys R Us continues selling toys faster and faster despite a lack of profit, making Mattel even more dependent on Toys R Us as a customer. It blows up the bubble where a more natural course of action would be for Toys R Us to go bankrupt or scale back ambitions earlier. Because it’s circular like this, it lends toward bigger crashing and burning. If OpenAI fails, all these investors that are deeply integrated into their supply chains lose both their investment and customer.
  - SV_BubbleTime 8mo ago
    OK, so absolutely good faith here what is the end game? Obviously, there’s a scenario of super power AI and then it’s a matter of continuing course. Electricity and silicon. What if you are right, and the scaling doesn’t work. It is too much power, time, hardware to improve… does openAI fold? Do they just actual use the models they have? Does everyone just decide that AI didn’t work and go back 5 years like it didn’t happen? Does the price change so that they have to be profitable making AI services expensive and rare instead of today where they are everywhere pointlessly? Or does this insane valuation only make sense with information you don’t have like insider scaling or efficiency news? Does China’s strategy of undercutting US value of models pay off bigly?
    - Flatterer3544 8mo ago
      Why so extreme, most likely just AI winter for a while, then when tech and societies has caught up, the advancements begins again. It is not like we threw away the dotcom advances, they were just put on hold for a while..
johnbarron 8mo ago
Nvidia sells the picks, AWS rents the mine, OpenAI digs, and the money just loops around the table...
mizzao 8mo ago
This piece that was on HN yesterday corroborates your gut: https://www.ben-evans.com/benedictevans/2026/2/19/how-will-openai-compete-nkg2x https://www.ben-evans.com/benedictevans/2026/2/19/how-will-o...
loeber 8mo ago
Comparing OpenAI and WeWork is a nonsensical perspective. OpenAI is shipping the most revolutionary product in a generation, with 800 million monthly active users. It's the fastest revenue ramp ever, at incredible scale -- $20B+ ARR. These are real fundamentals. They matter. And the cost of inference is coming down all the time. WeWork was a short-term/long-term lease arbitrage business. The two are nothing alike.
- mountainriver 8mo ago
  It’s one of the worst takes I’ve heard. OpenAI creates the fastest growing app ever, spawns a revolution bigger than the internet, and this guys take is they are like WeWork…
  - hk__2 8mo ago
    Being the first doesn’t mean you’ll win. They have no product, only a commodity that you can find at other companies or even for free (DeepSeek).
    - rvnx 8mo ago
      They have a product but it’s a commodity now. They are in the business of selling compute / datacenter rack spaces. A server where you pay per GBs transferred in/out. If it’s Gemini or GPT behind, for most use cases users wouldn’t care.
  - yibg 8mo ago
    Both can be true. Just because you've created a revolutionary product doesn't mean it's a viable business, let alone one worth $700+ billion. There is a lot of history of the first movers that created revolutionary products that eventually faded away into nothing, while others capitalized on the innovation.
    - runlaszlorun 8mo ago
      > There is a lot of history of the first movers that created revolutionary products that eventually faded away into nothing, while others capitalized on the innovation. I'd say most first movers fade away. Microsoft wasn't the first OS, Google wasn't the first search engine, Facebook wasn't the first social network... etc... etc... etc...
Nevermark 8mo ago
Circular investing can be a smoke screen. But it can also simply be the financial framing for direct bartering. Which is even more direct than regular financial transactions. "I will provide these resources you need, in exchange for part ownership", and/or "a limited license to your tech", "right to provide access to our customers on these terms", Etc." Amazon doesn't need any frothy fake revenue. But they do want to offer their customers the most in demand models, with the best financial terms for Amazon. Nvidia wants customers, but not at the expense of throwing money away. Their market cap may be volatile, but their books are beyond solid. I would be a lot more concerned if OpenAI was getting "funding" from a quantum computer startup, and vice versa.

system2 8mo ago

I am expecting OpenAI stock to be the most volatile in history. The first 3-6 months will be fun.

leonflexo 8mo ago
How far the volatility ripples out will give us a real look into just how self-reinforced the financials truly are.

ChadNauseam 8mo ago

> On the one hand you can look at these companies investing and take it as a signal that there is something there (in OpenAI) that's worth investing in. On the other hand all these companies that are investing are basically getting that investment back through spending commitments and such and are just using OpenAI as a proxy for what is essentially buying more revenue for themselves. I don't understand how this is some kind of cheat code. Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back".

rafaelmn 8mo ago
In exchange for 100$ of your stock AND making your revenue numbers look insane for the next cycle ? Also Nvidia margins are waaay higher than 20%
Alex3917 8mo ago
For both Amazon and Nvidia, their marginal costs are probably much lower than their fixed costs.
SecretDreams 8mo ago
> I don't understand how this is some kind of cheat code. Let's say I give you $100 on the condition that you buy $100 worth of product from me. And let's say that product cost me $80 to produce. Isn't that basically the same as me giving you $80? I don't see at all how that's me "basically getting that investment back". What if the product only costs you $20 to produce?
- a_victorp 8mo ago
  Or if the stock is not actually worth $100
hirako2000 8mo ago
That's like giving them* $20. And inflate your revenue by $80. Laws on competition make this kind of arrangements illegal, so you would have to exerce influence and have the invested in company pretends you happen to have been picked among competitors. In any case the SEC will be focused on whether the filings aren't made up to fraud investors, so they could reject the IPO, of the invested in company. Your own entity also is at risk. We all know MS gets away with it, they have good legal goons who find way to make all of it appears fair with regards to the law.
- GolfPopper 8mo ago
  >they have good legal goons who find way to make all of it appears fair with regards to the law I thought it was more that the legal goons delay the final judgement until Microsoft can eventually find someone they can (technically legally) bribe to drop the case?

bandrami 8mo ago

It's not "continue" buying as much as this is NVIDIA fronting the money for (most of) the hardware OpenAI has already ordered from them. It's like borrowing rent money from your drug dealer.

nelsonic 8mo ago
Great analogy. ;-) Doubt Jensen sees himself as a “dealer” but considering the vendor lock-in and margins, he pretty much is the Tony Montana of Ai Chips. It’s nuts that this type of financing is legal.
- Aperocky 8mo ago
  It is legal because Jensen isn't selling drugs, payday loans are legal too!
  - lotsofpulp 8mo ago
    It’s legal because both sides have armies of lawyers and are voluntarily entering into contracts where each party gets consideration. How someone can compare the above situation to a person getting a payday loan to put a roof over their head or food on their plate is beyond me. The “it’s like <insert wild and inappropriate analogy to stoke emotion>” is a tired trope.
    - bandrami 8mo ago
      Come on, calling a round of vendor financing (which is what the NVIDIA money is) "funding" is eggregiously misleading. The only new money entering the sector from this is SoftBank's stake.
      - lotsofpulp 8mo ago
        They might have dressed up the wording, but the details are all there for anyone who wants to objectively look at the deal. It is a group of two executives making a non coerced deal and disclosing the required information to investors. Might be a stupid gamble, but it's not akin to a loan shark shaking down a hungry, cold person for life's essentials.

max51 8mo ago

The "circular investment" is mostly start up companies using their stocks instead of cash to pay for server hardware and cloud computing. There is a few extra steps in between that make things look weird and convoluted, but the end results is really just big companies giving hardware and getting shares of ai companies in exchange for it.

dangus 8mo ago
I think you’re just describing how it’s circular. It’s like Toys R Us not having enough money to pay Mattel for Barbie dolls and telling Mattel they can have partial ownership of the company if they just supply them with some more toys. But the problem is that Toys R Us is spending $15, 20, or maybe even $50 (who knows?) to sell a $10 toy. Toys R Us continues selling toys faster and faster despite a lack of profit, making Mattel even more dependent on Toys R Us as a customer. It blows up the bubble where a more natural course of action would be for Toys R Us to go bankrupt or scale back ambitions earlier. Because it’s circular like this, it lends toward bigger crashing and burning. If OpenAI fails, all these investors that are deeply integrated into their supply chains lose both their investment and customer.
- SV_BubbleTime 8mo ago
  OK, so absolutely good faith here what is the end game? Obviously, there’s a scenario of super power AI and then it’s a matter of continuing course. Electricity and silicon. What if you are right, and the scaling doesn’t work. It is too much power, time, hardware to improve… does openAI fold? Do they just actual use the models they have? Does everyone just decide that AI didn’t work and go back 5 years like it didn’t happen? Does the price change so that they have to be profitable making AI services expensive and rare instead of today where they are everywhere pointlessly? Or does this insane valuation only make sense with information you don’t have like insider scaling or efficiency news? Does China’s strategy of undercutting US value of models pay off bigly?
  - Flatterer3544 8mo ago
    Why so extreme, most likely just AI winter for a while, then when tech and societies has caught up, the advancements begins again. It is not like we threw away the dotcom advances, they were just put on hold for a while..

johnbarron 8mo ago

Nvidia sells the picks, AWS rents the mine, OpenAI digs, and the money just loops around the table...

mizzao 8mo ago

This piece that was on HN yesterday corroborates your gut: https://www.ben-evans.com/benedictevans/2026/2/19/how-will-openai-compete-nkg2x https://www.ben-evans.com/benedictevans/2026/2/19/how-will-o...

loeber 8mo ago

Comparing OpenAI and WeWork is a nonsensical perspective. OpenAI is shipping the most revolutionary product in a generation, with 800 million monthly active users. It's the fastest revenue ramp ever, at incredible scale -- $20B+ ARR. These are real fundamentals. They matter. And the cost of inference is coming down all the time. WeWork was a short-term/long-term lease arbitrage business. The two are nothing alike.

mountainriver 8mo ago
It’s one of the worst takes I’ve heard. OpenAI creates the fastest growing app ever, spawns a revolution bigger than the internet, and this guys take is they are like WeWork…
- hk__2 8mo ago
  Being the first doesn’t mean you’ll win. They have no product, only a commodity that you can find at other companies or even for free (DeepSeek).
  - rvnx 8mo ago
    They have a product but it’s a commodity now. They are in the business of selling compute / datacenter rack spaces. A server where you pay per GBs transferred in/out. If it’s Gemini or GPT behind, for most use cases users wouldn’t care.
- yibg 8mo ago
  Both can be true. Just because you've created a revolutionary product doesn't mean it's a viable business, let alone one worth $700+ billion. There is a lot of history of the first movers that created revolutionary products that eventually faded away into nothing, while others capitalized on the innovation.
  - runlaszlorun 8mo ago
    > There is a lot of history of the first movers that created revolutionary products that eventually faded away into nothing, while others capitalized on the innovation. I'd say most first movers fade away. Microsoft wasn't the first OS, Google wasn't the first search engine, Facebook wasn't the first social network... etc... etc... etc...

Nevermark 8mo ago

Circular investing can be a smoke screen. But it can also simply be the financial framing for direct bartering. Which is even more direct than regular financial transactions. "I will provide these resources you need, in exchange for part ownership", and/or "a limited license to your tech", "right to provide access to our customers on these terms", Etc." Amazon doesn't need any frothy fake revenue. But they do want to offer their customers the most in demand models, with the best financial terms for Amazon. Nvidia wants customers, but not at the expense of throwing money away. Their market cap may be volatile, but their books are beyond solid. I would be a lot more concerned if OpenAI was getting "funding" from a quantum computer startup, and vice versa.