As Nvidia joined hands with OpenAI, the developer of ChatGPT, the "artificial intelligence (AI) bubble" debate has been rekindled. With this partnership, Nvidia is investing in OpenAI, which has become its biggest customer, and with that money OpenAI can increase its use and purchases of Nvidia products, and the cycle itself is said to be inflating the AI bubble.
According to Bloomberg on the 8th (local time), the outlet reported that "some analysts are expressing skepticism about the circular transactions forged by AI giants."
The circular transaction controversy emerged after Nvidia announced on the 22nd of 4th that it would invest $100 billion (about 142 trillion won) in OpenAI, and intensified when OpenAI and AMD signed a transaction on the 6th.
Under the deal, OpenAI will receive a total of 6 gigawatts (GW) worth of AI accelerators from AMD. Of that, it will receive 1 GW as AMD's MI450 products by the second half of next year. In return, OpenAI can purchase AMD common shares at $0.01 per share. If AMD's share price rises to $600, about four times the price at the time of the transaction, OpenAI will be able to buy up to 160 million AMD shares. The structure is that the news of teaming up with OpenAI boosts AMD's share price, and with that upside OpenAI secures AI chips at a bargain.
The previously announced Nvidia investment in OpenAI also has a strong circular transaction character. If Nvidia invests $100 billion in OpenAI, most of that funding will be used to lease Nvidia GPUs. In addition, Nvidia has invested in Intel ($5 billion) and xAI ($2 billion), and OpenAI has signed a computing power supply contract worth $300 billion with Oracle.
Such circular transactions can occur only if there is an expectation that AI models, the apex of the AI ecosystem composed of GPUs, AI servers, cloud, and AI models, will generate massive profits in the future. The problem is that it is impossible to foresee when AI developers like OpenAI will monetize. OpenAI is the world's largest startup, valued at $500 billion, but it is still in the red.
According to The Information, in the first half of this year OpenAI's revenue was tallied at $4.3 billion (about 6.1 trillion won), with a loss of $7.8 billion (about 11 trillion won). Nvidia Chief Executive Officer Jensen Huang also said on the 8th, "OpenAI still doesn't have the funds," adding, "Whether equity or liability, it will have to raise capital through exponentially increasing revenue."
However, OpenAI and Nvidia plan to further expand these transactions. OpenAI CEO Sam Altman said that day, "You can expect to see much more in the coming months," emphasizing, "If AI models' capabilities advance in the direction we expect, the economic value is limitless." Huang also said, "This is fundamentally different from the dot-com bubble of the 2000s," adding, "A new industrial revolution is beginning."