Wall Street is facing a strange kind of storm, where the same companies behind the AI boom are also now funding the very demand that brings them profits, and it is starting to look less like collaboration and more like a circular money machine. We’re not quite sure that’s totally legal.
But according to the Financial Times, analysts are afraid this loop could at the very least turn into an AI bubble, echoing the excess of the dot-com era, or perhaps even worse.
The most striking example came in late September, when Nvidia announced plans to invest up to $100 billion in OpenAI. The move would give Sam Altman’s ChatGPT maker even more access to Nvidia’s chips to train and run its next generation of models. That’s not all.
Nvidia has also poured $6.3 billion into CoreWeave, a data center operator it already owns 7% of, and is reported to have invested another $2 billion into Elon Musk’s xAI.
Meanwhile, OpenAI has expanded its own network, cutting deals with Oracle, CoreWeave, and AMD, and on Monday tapped Broadcom to build its first in-house AI processors.
AI giants build circular investments
Wall Street analysts say this new pattern shows how AI infrastructure providers are turning their customers into investment targets. Nvidia and others are putting money directly into the firms that rely on their hardware, and those firms are, in some cases, reinvesting right back into the suppliers. It’s a feedback loop powered by capital instead of consumers.
Blackstone president Jonathan Gray called it a top concern for investors. Speaking at the Financial Times Private Capital Summit in London, Jonathan said his firm now treats AI risk as a key part of every deal review.
“We’ve told our credit and equity teams: address AI on the first pages of your investment memos,” he said. He explained that AI has already changed business models and cost jobs, forcing investors to confront both sides of its impact.
The rise in high valuations for loss-making AI firms, combined with these circular financial ties, has stirred fresh talk of a bubble. Jonathan compared it to the frenzy before the 2000 crash, saying, “Think of Pets.com in 2000.”
Still, he said AI’s reach may be underestimated, with the potential to wipe out entire industries while adding trillions in corporate value. “We’re forcing the conversation,” he said. “Acting like it’s business as usual would be a mistake.”
Markets turn cautious amid AI euphoria
The pressure is now spilling into Wall Street’s broader market mood. The S&P 500 gained 1.7% last week, almost entirely from a Monday rebound, but remains stuck in a tight range between 6,550 and 6,750.
CME data shows majority of investors are still betting on two more Federal Reserve rate cuts this year and a strong economy to keep stocks high into New Year’s.
But Bank of America last week said that its high-net-worth clients now hold 64% of their assets in equities, close to the two-decade high from 2021.
That means less room for fresh buying, even with the market chasing AI-linked gains. Hedge funds that missed the rally earlier this year have re-entered heavily, reaching record leverage before pulling back last week.
Goldman Sachs’ Tony Pasquariello, head of hedge-fund coverage, said funds just executed “the largest selling of both U.S. and global equities since April,” adding that there was also “a big increase in macro shorts.”
Tony pointed out that while “plenty of length” still remains among investors, “the market did clean up some risk over the past two weeks,” and predicted that “as we move through October, the technicals will improve.”
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