Pulse News

# AI’s Circular Money Flows

By Martin Peers

If you want a sense of the risks that lurk in the great AI-data center investment boom now underway, check out our scoop today about Nvidia's relationship with CoreWeave, the upstart cloud computing firm planning to go public in a couple of weeks. The story reveals that Nvidia, beyond both investing in CoreWeave and selling chips to it, also agreed two years ago to spend $1.3 billion over several years renting those chips from CoreWeave. That arrangement gave CoreWeave's business an invaluable early boost, paving the way for further business deals it is riding toward the IPO.

But if the circular arrangement makes you scratch your head, consider this: It's just one example of several in the AI world where money has traveled in a circle, making the AI business seem bigger than it actually is. At least part of Microsoft's $13 billion investment in OpenAI went back to the software giant in the form of OpenAI's spending on Microsoft's Azure cloud service. Both Amazon and Google have invested billions in Anthropic, which turned around and spent at least part of that money on their cloud services.

These kinds of arrangements are a win-win for the companies—burnishing the valuations of the startups as well as the AI revenues of the cloud providers—but less so for investors. Microsoft, Amazon, and Google have all talked up their fast-growing AI revenues, without explaining that some of it is essentially captive spending by startups they partly own. As for Nvidia's arrangement with CoreWeave, the AI chip designer clearly wants to have CoreWeave as a backup customer in case the big cloud firms shift away from buying Nvidia's chips in favor of their own.

AI's money-go-around will come to an end eventually, hastened by expanding data center capacity throughout the industry. OpenAI, for instance, is pulling back from its reliance on Microsoft by investing in the Stargate data center venture and striking a deal with CoreWeave for computing capacity. The big risk is that the industry will eventually overbuild data center capacity. We have no idea when or whether that day will come, but judging by past tech cycles—such as the explosion in fiber optic building in the early 2000s—investors can't discount it.

## Marc Lore's Latest Idea

Marc Lore, the entrepreneur behind Wonder, a food- and meal-delivery firm, is full of ideas. His latest, though, may not land with ordinary people. According to The Wall Street Journal today, Lore wants to use AI to "automatically order personalized meals for customers." The Journal quotes Lore saying Wonder could use people's health data, health goals, and budgets to "autonomously feed you breakfast, lunch, and dinner from the assets that we've got." Really? Half the fun of eating is picking your food. Who wants an AI app to decide for you?