How OpenAI uses complex and circular deals to fuel its multibillion-dollar rise

Okay, that article is a little bit shallow. I just summarises the headlines of the last weeks of circular deals. But is there also a more in depth article that sheds a little more light onto what this actually means? From a financial perspective?

It’s probably hard to do that in a news context because the real rationales are pretty tight.

Depending on your POV OpenAI and the surrounding AI hype machine is at the extremes either the dawn of a new era, or a metastasized financial cancer that’s going to implode the economy. Reality lies in the middle, and nobody really knows how the story is going to end.

In my personal opinion, “financial innovation” (see: the weird opaque deals funding the frantic data center construction) and bullshit like these circular deals driving speculation is a story we’ve seen time and time again, and it generally ends the same way.

An organization that I’m familiar with is betting on the latter - putting off a $200M data center replacement, figuring they’ll acquire one or two in 2-3 years for $0.20 on the dollar when the PE/private debt market implodes.

Ed Zitron has been shouting into the void about this for quite some time: https://www.wheresyoured.at/the-case-against-generative-ai/

He also has a podcast called Better Offline, which is slightly too ad heavy for my taste. Nevertheless, with my meagre understanding of the large corporate finances I was not able to find any errors in his core argument regardless of his somewhat sensationalist style of writing.

> Reality lies in the middle

The argument to moderation/middle ground fallacy is a fallacy.

https://en.wikipedia.org/wiki/Argument_to_moderation

My complaint about Ed Zitron is that he's _always_ shouting into the void about something. A lot of the issues he covers are legitimate and deserve the scorn he gives them but at some point it became hard for me to sort the signal from the noise.

IMF chief economist has thoughts: https://www.afr.com/wealth/investing/the-crash-that-could-to...

> Depending on your POV OpenAI and the surrounding AI hype machine is at the extremes either the dawn of a new era

Eh, in a way they're not mutually exclusive. Look back at the dot com crash: it was all about things like online shopping, which we absolutely take for granted and use every day in 2025. Same for the video game crash in the 80s. They are both an overhyped bubble and and the dawn of a new era.

Not really. The idea that reality lies _in_ the middle is fairly coherent. It's not, on it's face, absolutely true but there are and infinite number of options between two outcomes so the odds are overwhelmingly in the favor that the truth lies somewhere in between. Is either side totally right about every single point of contention between them? Probably not, so the answer is likely in the middle. The fallacy is a lot easier to see when you're arguing about one precise point. In that case, someone is probably right and wrong. But, in cases where a side is talking about a complex event with a multitude of data points, both extremes are likely not completely correct and the answer does, indeed, lie in between the extremes.

The fallacy is that the true lies _at_ the middle, not in the middle.

Ed Zitron sucks because he constantly spitballs on easy to confirm topics and keeps being wrong in ways that should be trivial to check and fix. Case in point:

https://bsky.app/profile/notalawyer.bsky.social/post/3ltkami...

>infinite number of options between two outcomes so the odds are overwhelmingly in the favor that the truth lies somewhere in between

This is totally fallacious.

You're thinking in one dimension. Truth. Add another dimension, time, and now we're talking about reality.

Ultimately, if both sides have a true argument, the real issue is which will happen first in time? Will AI change the world before the whole circular investment vehicle implode? Or after, like happened with the dotcom boom?

Flat-earthers: The earth is flat.

Round-earthers: The earth is round.

"Reality lies in the middle" argument: The earth is oblong, not a perfect sphere, so both sides were right.

It isn't.

"AI is a bubble" and "AI is going to replace all human jobs" is, essentially, the two extremes I'm seeing. AI replacing some jobs (even if partially) and the bubble-ness of the boom are both things that exist on a line between two points. Both can be partially true and exist anywhere on the line between true and false.

No jobs replaced<-------------------------------------->All jobs replaced

Bubble crashes the economy and we all end up dead in a ditch from famine<---------------------------------------->We all end up super rich in the post scarcity economy

"Round" does not mean spherical and both of these claims are falsifiable and mutually exclusive.

The AI situation doesn't not have two mutually exclusive claims, it has two claims on the opposite sides of economic and cultural impact that are differences of magnitude and direction.

AI can both be a bubble and revolutionary, just like the internet.

I agree there is a large continuum of possibilities, but that does not mean that something in the middle is more likely, that is the fallacious step in the reasoning.

It is completely fallacious.

For one, in higher dimensions, most of the volume of a hypersphere is concentrated near the border.

Secondly, and it is somewhat related, you are implicitly assuming some sort of convexity argument (X is maybe true, Y is maybe true, 0.5X + 0.5 Y is maybe true). Why?

If we're gonna be pendantic about fallacies, you're using argument by analogy and it's not in any way comparable to the claims GP made about OpenAI.

Exactly. I think the difference is that we've developed a cadre of people are think 24x7 about capturing value in a way that makes dotcom era moguls look naive.

AI is a powerful and compelling technology, full stop. The sausage making process where the entire financial economy is pivoting around it is a different matter, and can only end in disaster.

It's not an argument by analogy. It's a reductio ad absurdum on the generalization that reality always lies in the middle but not always at the exact middle.