The AI Circular Transactions For Chips And Datacenters

 

A well known fact is that there have been many circular chip and center financing deals deals among the AI leaders NVIDIA, OpenAI, Anthropic, Microsoft, Alphabet, Amazon, Meta, Broadcom. Such circular deals could be artificially inflating the revenues of the current AI leaders.

 

In the building of the Dot Com boom and subsequent bust in 1996 - 2001 there were also many circular deals documented that inflated many of the technology companies revenues in the Dot Com boom. 

Circular deals quite possibly artificially could inflate the revenue NVIDIA, OpenAI, Anthropic, Microsoft, Alphabet, Amazon, Meta, Broadcom by between 10 % and 30 %. 

Many Wall Street analysts, investors and Silicon Valley technologists and investors believe circular deals artificially increase the revenues of NVIDIA, OpenAI, Anthropic, Microsoft, Alphabet, Amazon, Meta, Broadcom by between 10 % and 30 %.

If  the revenue of NVIDIA, OpenAI, Anthropic, Microsoft, Alphabet, Amazon, Meta, Broadcom is inflated by 10 %, they are 22 % overvalued.

If  the revenue of NVIDIA, OpenAI, Anthropic, Microsoft, Alphabet, Amazon, Meta, Broadcom is inflated by 20 %, they are 46 % overvalued. 

If  the revenue of NVIDIA, OpenAI, Anthropic, Microsoft, Alphabet, Amazon, Meta, Broadcom is inflated by 30 %, they are 67 % overvalued. 

Most probably NVIDIA's revenue is the one most artificially inflated via circular AI deals, whereby NVIDIA buys equity in OpenAI for tens of billions of USDs and then OpenAI turns and invests the gotten from NVIDIA's billions of USDs into buying the latest NVIDIA's chips. Anthropic has also done such deals also.

Other companies, for example buy GPUs from NVIDIA, then lease back the computing power to OpenAI and Anthropic. 

These lease back of GPU transactions are also a kind of circular deal. 

 

 

What If The Private Credit AI Boom Turns Into A Bust?

The largest private credit asset managers Blackstone, KKR, Apollo, BlackRock, Carlyle, Blue Owl, Ares, Partners Group, EQT, CVC, TPG etc. have invested large part of their private credit assets under management in artificial intelligence, AI data center projects, namely hundreds of billions of USDs.

Also they invest large part of their newly raised private credit assets in AI data center infrastructure.

If the artificial intelligence, AI boom turns into a bust defined by the Nasdaq Composite as falling 62 % from its recent peak,  the largest private credit asset managers Blackstone, KKR, Apollo, BlackRock, Carlyle, Blue Owl, Ares, Partners Group, EQT, CVC, TPG etc. and mid sized and smaller private credit issuers could face solvency crises.

Because they will not be able to realize gain on their private credit, private equity and real estate assets under management invested in  artificial intelligence, AI data center projects and will not be able to pay carry, net realized gains from their AI investments to their investment and other staff, their staff members could start fleeing to other firms.

This will in its own effect hinder the asset raising process of  the largest private credit asset managers Blackstone, KKR, Apollo, BlackRock, Carlyle, Blue Owl, Ares, Partners Group, EQT, CVC, TPG etc. and mid sized and smaller private credit, private equity asset managers and they will face solvency issues.

Once the circa 10 trillion USDs assets under management private equity industry starts experiencing problems this could well cause large loan losses to global banks s JPMorgan, Bank of America, Citigroup, Wells Fargo, Barclays, Deutsche Bank, HSBC, BNP Paribas, Societe Generale, Goldman Sachs and Morgan Stanley etc. which have financed the private equity, private credit deals to a large extent with loans to the private equity portfolio companies.

So if the AI boom turns into a bust, the solvency of JPMorgan, Bank of America, Citigroup, Wells Fargo, Barclays, Deutsche Bank, HSBC, BNP Paraibas, Societe Generale, Goldman Sachs and Morgan Stanley could be threatened. Their market capitalization could start falling and this could create a vicious circle as in the Great Recession of 2008.

But for now the AI boom is in full swing.