6 ms·

Context: a few weeks ago, Anthropic signed a deal to buy "multiple gigawatts of next-generation TPU capacity" from Google and Broadcom [1]. There have been seve

Context: a few weeks ago, Anthropic signed a deal to buy "multiple gigawatts of next-generation TPU capacity" from Google and Broadcom [1]. There have been several previous deals, too. Some people call this sort of thing a "circular deal", but perhaps a better way to think of it is as a very large-scale version of vendor financing? The simple version of vendor financing is when a vendor gives a retailer time to pay for goods they purchased for resale. This is effectively a loan that's backed by the retailer's ability to resell the goods. There's a possibility that the retailer goes broke and doesn't pay, but the vendor has insight into how well the retailer is doing, so they know if they're a good risk. Similarly, Google likely knows quite a lot about Anthropic because Anthropic buys computing services from Google for resale. They're making an equity investment rather than a loan, but the money will be coming back to Google, assuming Anthropic's sales continue to rise as fast as they have been. Also, if you own Google stock, some small part of that is an investment in Anthropic? [1] https://www.anthropic.com/news/google-broadcom-partnership-compute https://www.anthropic.com/news/google-broadcom-partnership-c...

colechristensen 6mo ago
It could be legit, it could be a thickly veiled accounting fraud continuing the valuation inflation with fake deals that count money multiple times. Maybe a little bit of both.
- rnxrx 6mo ago
  Lots and lots of vendor financing during the dotcom era, and it ended up being a material part of those vendors' own difficulties. Especially when service providers were concerned (e.g. the huge crash in optical in particular). Obviously it's not a perfect comparison, but you have to wonder how much of NVIDIA's income (for instance) is ultimately funded by its own money.
zymhan 6mo ago
To be honest, I think "vendor financing" is still a very risky premise. Vendors may be positioned to know how a customer is doing, but they're also incentivized to overestimate how well a customer is going to perform. GE Capital (edit: and GMCA) is a great example of how seemingly reasonable vendor financing can cause the lender serious problems.
- skybrian 6mo ago
  The risks are different, but there's no getting around that the value of any investment is based on future cash flows and that's speculating about the future. To the extent that Google and Anthropic are competing for AI business, Google is somewhat hedged against Anthropic winning market share. They still get data center revenue and they own equity, so that’s a consolation prize. On the other hand, it’s increasing Google’s investment in AI, in general.
- cowsandmilk 6mo ago
  GE Capital was not just vendor financing and its serious problems were not due to vendor financing. I don’t think it is a great example in any way.
- Spooky23 6mo ago
  GE Capital was a different creature, riding the line of fraud in some ways. They misapplied accounting rules and had to write down or capitalize over $20B for long term care insurance.
  - zymhan 6mo ago
    That's what brought them down, but that could bring down anyone. My point is that vendor financing turns non-finance companies into finance companies, and brings along a huge can of worms.
    - Spooky23 6mo ago
      That’s fair. You become vulnerable to a guy like Jack Welch. The vendor financing stuff I saw (as a junior / intern at a supplier) in those days was a reflection of that culture. They’d lease capital equipment through GE Capital, and pack it with other stuff to the limit of their accountants appetite for risk. (You can usually roll 20% of the value into services or peripheral stuff) I remember one deal where we had to run around and buy office supplies and tools with a corporate card. I did 4 Honda Civic of laser toner. GE was reporting their own capital equipment and office supplies as revenue on the Capital side. :) But that is penny ante stuff in terms of what they did. The AI stuff is a shady variation of that, but likely far worse as we’ve fired all of the watchers.
WarmWash 6mo ago
IIRC Google already outright owns 15% of Anthropic.
- skybrian 6mo ago
  An article from a year ago [1] says 14%, capped at 15%, and no voting rights. And that was before these new investments. I wonder what they did? I suppose the remaining 1% is worth a lot more now. [1] https://www.nytimes.com/2025/03/11/technology/google-investment-anthropic.html https://www.nytimes.com/2025/03/11/technology/google-investm...
mattbrewsbytes 6mo ago
Reciprocal agreements aren't new, sometimes they're used to gain access to a market the other party already has established a foothold in for other industry segments. These companies operate in the same general industry: tech/internet so it could be complementary services they are each after. So far both of these companies have shown they suck at support so we know that's not it. It could be that it might help Anthropic to leverage Gemini in their competition with OpenAI and Google will take compute commitments. Anecdata: I'm finding a lot of my "type random question in URL/search bar" has decent top Gemini answers where I don't scroll to results unless I need to dive deeper.
- rockskon 6mo ago
  Funny how Gemini generally takes into account all the words you type whereas Google search tends to ignore most words you type or otherwise direct you to results for thematically (or grammatically or semantically) similar words to what you searched but otherwise wholly irrelevant. Google crippling search to bolster AI is a dangerous game. But without people going to competitors, what's the recourse?
  - bostik 6mo ago
    They're already crippling their AI to perform what look like sponsored searches. The plural of anecdote is not data but this does not feel like a one-off thing: I was trying to find where it would be possible to get to have a reasonable holiday, and asked Gemini to list me all the international airports in two named countries that had direct flights from my preferred departure airport. The response came back with a single proposed flight destination with "book here" prominently available. Only once I told it that the search was NOT an impulse purchase intent and I really wanted to know the possible destinations - then did it actually come back with the list of airports that satisfied my search criteria. Although if we are looking for the bright side, it did provide a valid and informative answer on the second try. I haven't had that kind of experience on SEO-infested Google search for quite a long time now.
- bojan 6mo ago
  I agree those results ate handy, but I had several occasions where they turned out to be completely wrong. 95% correctness rate is not good enough.
fc417fc802 6mo ago
In another context I might see it as vendor financing. However given that Google and Anthropic are competitors in this segment and given that Google has previously invested in them I'd rather see this as a sort of bartered stock purchase presumably for the purpose of hedging against failure. If Anthropic wins the race and it turns out to be winner takes all and you happen to own half of Anthropic then you still win half of the immediate spoils even though your internal team lost. If you view losing the race as an existential threat then having all your eggs in the one basket is a terrible proposition.
- skybrian 6mo ago
  Sure, since Google is both a supplier and a competitor, it’s both vendor finance and hedging. Also, it increases their investment in AI, in general. Arguably, too much of this kind of hedging is anti-competitive. But that doesn’t seem to be much of a problem yet?
  - bonesss 6mo ago
    Are we stoping too early in this analysis though? Google versus OpenAI and Anthropic, sure, but Microsoft is deep into OpenAI. Google helping Anthropic is also putting MS into a corner (one that may even be shrinking? Copilot and openAI financing hurting their brand, rumours of deep displeasure at OpenAIs promises v returns). Seen from afar I see Google happy to provide TPUs for money (improving Googles strategic positioning), torpedoing confidence in LLMs with their search AI summaries, and using their bankroll to force larger competitors (MS in particular), to keep investments high regardless of performance and user revolts and internal tensions with Sam Altmans sales approach. Plus, Anthropic is in ‘the lead’ right now product wise, so grooming them as a potential purchase would also seem to be a strategic hedge in the long term.
    - ojosilva 6mo ago
      MS is not so deep with OpenAI, it's not all black and white, they have signed several distribution deals where Claude drives Copilot [1], since Anthropic and MS are better aligned in the Enterprise market, it makes sense. It also makes sense for MS not to lose ground anywhere at this point and play with the best. Actually, any cash rich company that is not OpenAI or Anthropic wants to be close-by when any of the two needs money. That's the ultimate win they can aspire for right now, get a financial slice of frontier models on one hand while not losing revenue on the other given the existential ordeal AI represents for them. 1. https://www.microsoft.com/en-us/microsoft-365/blog/2026/03/09/copilot-cowork-a-new-way-of-getting-work-done/ https://www.microsoft.com/en-us/microsoft-365/blog/2026/03/0...
pseudohadamard 6mo ago
It's pretty much vendor financing (although we could argue whether it should be classed as circular investment), with the extra trick being that both sides get to make number go up with it, through stock market valuations and the ability to borrow more money to set fire to so you can show how successful you are.
- etempleton 6mo ago
  I think everyone is incentivized to keep the music playing and the party going with AI. Because the alternative is a massive correction like we have rarely seen. What if AI is never good or cheap enough to reach significant profitability?
the_killer 6mo ago
it's your time.. ~ TK
netcan 6mo ago
So yes, but that doesn't negate the circular investment aspect, for most intents and purposes. The risk is from this structure is mostly to do with how this affects market cap. Companies using the value of their shares to fund demand for their services. That's a risk.
- robjeiter 6mo ago
  I feel like the whole market at this point is just AI since big tech other than Apple are all massively invested into that. Everyone owns either the S&P or the total world ETF which are both heavily skewed towards big tech and this trade - so literally everybody is in it. It might go well for a few more quarters/years but once something breaks or gets exponentially cheaper this will take down the whole market with it.
  - netcan 6mo ago
    It's just hard to tell the difference between "real" demand and "circular." That's the concern. PG had an essay about this during the dotcom, when he worked at yahoo. Iirc...Yahoo's share price and other big successes in the space attracted investment into startups. Startups used that money to advertise on yahoo. Yahoo bought some of these the startups. So... a lot of the revenue used to analyze companies for investment was actually a 2nd order side effect of these investments. Here the risk is that we have Ai investments servicing Ai investments for other Ai investments. Google buys Nvidia chips to sell anthropic compute. Anthropic sells coding assist to Ai companies (including Google and Nvidia). They buy anthropic services with investor money that is flowing because of all this hype. Imo the general risk factor is trying to get ahead of actual worldly use. The Ai optimists have a sense that Ai produces things that are valuable (like software) at massive scale...that is output. But... even if true, it will take a lot of time, and lot of software for the Econony to discover this, go through the path dependencies and actually produce value. The most valuable, known software has already afy been written. The stuff that you could do, but haven't yet is stuff that hasn't made the cut. Value isn't linear.
    - datavirtue 6mo ago
petra 6mo ago
Good perspective. Let's say Anthropic fails to pay it's debt, can Google take those TPU's back and make money from them?
- skybrian 6mo ago
  They don't get equity back, but the TPU's are all in Google's datacenters and they can rent them to whoever pays.
zrn900 6mo ago
[dead]
renticulous 6mo ago
Google already knows Anthropic is a good investment. Google owns the chrome browser and they already know from traffic data how well Anthropic is doing. This is similar to how Mark Zuckerberg came to know Instagram is a good deal.
kmacdough 6mo ago
It's still circular. They will succeed or collapse together. And since they make up such a fraction of global market cap, we're in for the ride together. And the circularity makes the actual investment numbers fairly meaningless. They don't mind if they end up overpaying for future services, as long as they overpay each other equally.
- wavemode 6mo ago
  Even if Anthropic completely folds, that wouldn't "collapse" Google. $40B is less than 1/3 of Google's net income (that is, the profit they made which otherwise would just be lying around) in a single year.
asah 6mo ago
$40B is barely more than one quarter of google's net profit.
larrytheworm 6mo ago
[dead]
34ylsh 6mo ago
[dead]
speedylight 6mo ago
So Google gives Anthropic money which anthropic then uses to buy compute from Google. How does this end up screwing over regular people?

colechristensen 6mo ago

It could be legit, it could be a thickly veiled accounting fraud continuing the valuation inflation with fake deals that count money multiple times. Maybe a little bit of both.

rnxrx 6mo ago
Lots and lots of vendor financing during the dotcom era, and it ended up being a material part of those vendors' own difficulties. Especially when service providers were concerned (e.g. the huge crash in optical in particular). Obviously it's not a perfect comparison, but you have to wonder how much of NVIDIA's income (for instance) is ultimately funded by its own money.

zymhan 6mo ago

To be honest, I think "vendor financing" is still a very risky premise. Vendors may be positioned to know how a customer is doing, but they're also incentivized to overestimate how well a customer is going to perform. GE Capital (edit: and GMCA) is a great example of how seemingly reasonable vendor financing can cause the lender serious problems.

skybrian 6mo ago
The risks are different, but there's no getting around that the value of any investment is based on future cash flows and that's speculating about the future. To the extent that Google and Anthropic are competing for AI business, Google is somewhat hedged against Anthropic winning market share. They still get data center revenue and they own equity, so that’s a consolation prize. On the other hand, it’s increasing Google’s investment in AI, in general.
cowsandmilk 6mo ago
GE Capital was not just vendor financing and its serious problems were not due to vendor financing. I don’t think it is a great example in any way.
Spooky23 6mo ago
GE Capital was a different creature, riding the line of fraud in some ways. They misapplied accounting rules and had to write down or capitalize over $20B for long term care insurance.
- zymhan 6mo ago
  That's what brought them down, but that could bring down anyone. My point is that vendor financing turns non-finance companies into finance companies, and brings along a huge can of worms.
  - Spooky23 6mo ago
    That’s fair. You become vulnerable to a guy like Jack Welch. The vendor financing stuff I saw (as a junior / intern at a supplier) in those days was a reflection of that culture. They’d lease capital equipment through GE Capital, and pack it with other stuff to the limit of their accountants appetite for risk. (You can usually roll 20% of the value into services or peripheral stuff) I remember one deal where we had to run around and buy office supplies and tools with a corporate card. I did 4 Honda Civic of laser toner. GE was reporting their own capital equipment and office supplies as revenue on the Capital side. :) But that is penny ante stuff in terms of what they did. The AI stuff is a shady variation of that, but likely far worse as we’ve fired all of the watchers.

WarmWash 6mo ago

IIRC Google already outright owns 15% of Anthropic.

skybrian 6mo ago
An article from a year ago [1] says 14%, capped at 15%, and no voting rights. And that was before these new investments. I wonder what they did? I suppose the remaining 1% is worth a lot more now. [1] https://www.nytimes.com/2025/03/11/technology/google-investment-anthropic.html https://www.nytimes.com/2025/03/11/technology/google-investm...

mattbrewsbytes 6mo ago

Reciprocal agreements aren't new, sometimes they're used to gain access to a market the other party already has established a foothold in for other industry segments. These companies operate in the same general industry: tech/internet so it could be complementary services they are each after. So far both of these companies have shown they suck at support so we know that's not it. It could be that it might help Anthropic to leverage Gemini in their competition with OpenAI and Google will take compute commitments. Anecdata: I'm finding a lot of my "type random question in URL/search bar" has decent top Gemini answers where I don't scroll to results unless I need to dive deeper.

rockskon 6mo ago
Funny how Gemini generally takes into account all the words you type whereas Google search tends to ignore most words you type or otherwise direct you to results for thematically (or grammatically or semantically) similar words to what you searched but otherwise wholly irrelevant. Google crippling search to bolster AI is a dangerous game. But without people going to competitors, what's the recourse?
- bostik 6mo ago
  They're already crippling their AI to perform what look like sponsored searches. The plural of anecdote is not data but this does not feel like a one-off thing: I was trying to find where it would be possible to get to have a reasonable holiday, and asked Gemini to list me all the international airports in two named countries that had direct flights from my preferred departure airport. The response came back with a single proposed flight destination with "book here" prominently available. Only once I told it that the search was NOT an impulse purchase intent and I really wanted to know the possible destinations - then did it actually come back with the list of airports that satisfied my search criteria. Although if we are looking for the bright side, it did provide a valid and informative answer on the second try. I haven't had that kind of experience on SEO-infested Google search for quite a long time now.
bojan 6mo ago
I agree those results ate handy, but I had several occasions where they turned out to be completely wrong. 95% correctness rate is not good enough.

fc417fc802 6mo ago

In another context I might see it as vendor financing. However given that Google and Anthropic are competitors in this segment and given that Google has previously invested in them I'd rather see this as a sort of bartered stock purchase presumably for the purpose of hedging against failure. If Anthropic wins the race and it turns out to be winner takes all and you happen to own half of Anthropic then you still win half of the immediate spoils even though your internal team lost. If you view losing the race as an existential threat then having all your eggs in the one basket is a terrible proposition.

skybrian 6mo ago
Sure, since Google is both a supplier and a competitor, it’s both vendor finance and hedging. Also, it increases their investment in AI, in general. Arguably, too much of this kind of hedging is anti-competitive. But that doesn’t seem to be much of a problem yet?
- bonesss 6mo ago
  Are we stoping too early in this analysis though? Google versus OpenAI and Anthropic, sure, but Microsoft is deep into OpenAI. Google helping Anthropic is also putting MS into a corner (one that may even be shrinking? Copilot and openAI financing hurting their brand, rumours of deep displeasure at OpenAIs promises v returns). Seen from afar I see Google happy to provide TPUs for money (improving Googles strategic positioning), torpedoing confidence in LLMs with their search AI summaries, and using their bankroll to force larger competitors (MS in particular), to keep investments high regardless of performance and user revolts and internal tensions with Sam Altmans sales approach. Plus, Anthropic is in ‘the lead’ right now product wise, so grooming them as a potential purchase would also seem to be a strategic hedge in the long term.
  - ojosilva 6mo ago
    MS is not so deep with OpenAI, it's not all black and white, they have signed several distribution deals where Claude drives Copilot [1], since Anthropic and MS are better aligned in the Enterprise market, it makes sense. It also makes sense for MS not to lose ground anywhere at this point and play with the best. Actually, any cash rich company that is not OpenAI or Anthropic wants to be close-by when any of the two needs money. That's the ultimate win they can aspire for right now, get a financial slice of frontier models on one hand while not losing revenue on the other given the existential ordeal AI represents for them. 1. https://www.microsoft.com/en-us/microsoft-365/blog/2026/03/09/copilot-cowork-a-new-way-of-getting-work-done/ https://www.microsoft.com/en-us/microsoft-365/blog/2026/03/0...

pseudohadamard 6mo ago

It's pretty much vendor financing (although we could argue whether it should be classed as circular investment), with the extra trick being that both sides get to make number go up with it, through stock market valuations and the ability to borrow more money to set fire to so you can show how successful you are.

etempleton 6mo ago
I think everyone is incentivized to keep the music playing and the party going with AI. Because the alternative is a massive correction like we have rarely seen. What if AI is never good or cheap enough to reach significant profitability?

the_killer 6mo ago

it's your time.. ~ TK

netcan 6mo ago

So yes, but that doesn't negate the circular investment aspect, for most intents and purposes. The risk is from this structure is mostly to do with how this affects market cap. Companies using the value of their shares to fund demand for their services. That's a risk.

robjeiter 6mo ago
I feel like the whole market at this point is just AI since big tech other than Apple are all massively invested into that. Everyone owns either the S&P or the total world ETF which are both heavily skewed towards big tech and this trade - so literally everybody is in it. It might go well for a few more quarters/years but once something breaks or gets exponentially cheaper this will take down the whole market with it.
- netcan 6mo ago
  It's just hard to tell the difference between "real" demand and "circular." That's the concern. PG had an essay about this during the dotcom, when he worked at yahoo. Iirc...Yahoo's share price and other big successes in the space attracted investment into startups. Startups used that money to advertise on yahoo. Yahoo bought some of these the startups. So... a lot of the revenue used to analyze companies for investment was actually a 2nd order side effect of these investments. Here the risk is that we have Ai investments servicing Ai investments for other Ai investments. Google buys Nvidia chips to sell anthropic compute. Anthropic sells coding assist to Ai companies (including Google and Nvidia). They buy anthropic services with investor money that is flowing because of all this hype. Imo the general risk factor is trying to get ahead of actual worldly use. The Ai optimists have a sense that Ai produces things that are valuable (like software) at massive scale...that is output. But... even if true, it will take a lot of time, and lot of software for the Econony to discover this, go through the path dependencies and actually produce value. The most valuable, known software has already afy been written. The stuff that you could do, but haven't yet is stuff that hasn't made the cut. Value isn't linear.
  - datavirtue 6mo ago

petra 6mo ago

Good perspective. Let's say Anthropic fails to pay it's debt, can Google take those TPU's back and make money from them?

skybrian 6mo ago
They don't get equity back, but the TPU's are all in Google's datacenters and they can rent them to whoever pays.

zrn900 6mo ago

[dead]

renticulous 6mo ago

Google already knows Anthropic is a good investment. Google owns the chrome browser and they already know from traffic data how well Anthropic is doing. This is similar to how Mark Zuckerberg came to know Instagram is a good deal.

kmacdough 6mo ago

It's still circular. They will succeed or collapse together. And since they make up such a fraction of global market cap, we're in for the ride together. And the circularity makes the actual investment numbers fairly meaningless. They don't mind if they end up overpaying for future services, as long as they overpay each other equally.

wavemode 6mo ago
Even if Anthropic completely folds, that wouldn't "collapse" Google. $40B is less than 1/3 of Google's net income (that is, the profit they made which otherwise would just be lying around) in a single year.

asah 6mo ago

$40B is barely more than one quarter of google's net profit.

larrytheworm 6mo ago

[dead]

34ylsh 6mo ago

[dead]

speedylight 6mo ago

So Google gives Anthropic money which anthropic then uses to buy compute from Google. How does this end up screwing over regular people?