The term “circular” is being used by skeptics to describe the $100 billion deal between Nvidia and OpenAI, and it’s at the very heart of the debate over whether Nvidia’s $5.05 trillion valuation is real or just hype.
Nvidia, which crossed the $5T mark on Wednesday, is the poster child for the “AI boom.” Its $1 trillion growth in three months and $500 billion order book seem to justify the optimism. Partnerships with Uber, Nokia, and the US government add to its legitimacy.
But the “bust” argument hinges on the idea that this ecosystem is a closed loop. Skeptics, including figures related to the IMF and Bank of England, argue that deals like the $100 billion OpenAI pact are not straightforward transactions.
They suggest money is being recycled to inflate valuations, creating a bubble. This theory is supported by a critical data point: “nearly all AI pilot programs in businesses fail.” If real-world customers aren’t profiting, the demand from AI labs (like OpenAI) looks less like genuine demand and more like part of the hype cycle.
With Nvidia’s valuation now a matter of global economic stability, this question of whether the AI economy is “circular” or “real” has become one of the most important in the world.