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

These kinds of deals were very much a la mode just prior to the .com crash. Companies would buy advertising, then the websites and ad agencies would buy their services and they'd spend it again on advertising. The end result is immense revenues without profits.

There’s one key difference in my opinion: pre-.com deals were buying revenue with equity and nothing else. It was growth for growth’s sake. All that scale delivered mostly nothing.

OpenAI applies the same strategy, but they’re using their equity to buy compute that is critical to improving their core technology. It’s circular, but more like a flywheel and less like a merry-go-round. I have some faith it could go another way.

I think that, at best, that description boils down to Nvidia, Oracle, etc inventing fake wealth to build something and OpenAI building their own fake wealth by getting to use that new compute effectively for free.

There are physical products involved, but the situation otherwise feels very similar to ads prior to dotcom.

The same way the stock market invents a trillion dollars of fake wealth on a strong up day?

That's capital markets working as intended. It's not necessarily doomed to end in a fiery crash, although corrections along the way are a natural part of the process.

It seems very bubbly to me, but not dotcom level bubbly. Not yet anyway. Maybe we're in 1998 right now.

I sell you a cat for $1B and you sell me a dog for $1B and now we’re both billionaires! Whether the capital markets “want” that or not it’s still silly.

If we’re both willing to pay that in a free market economy, then we both leave the deal happy.

Things are worth what people are willing to pay for them. And that can change over time.

Sentiment matters more than fundamental value in the short term.

Long term, on a timescale of a decade or more, it’s different.

Is that not fraud?