The AI gold rush rages on. Multibillion dollar AI deals are being inked left and right between the heavyweights of the tech sector, dazzling us with awesome sums and promising that this revolutionary tech is just getting started.But there’s something very worrying about many of these deals: they’re often “circular,” as a slew of recent coverage has noted, meaning that AI companies are pouring money into one another, creating an illusion of a robust ecosystem that skeptics worry could quickly come crashing down. And many of the deals tie back to Nvidia, the chipmaker whose hardware is underpinning our age of AI, for which it has become the world’s most valuable company.Experts warn that all this inter-industry dealing may be one of the most ominous signs of an impending bubble.One recent example is Nvidia’s agreement to invest up to $100 billion in OpenAI, as the ChatGPT maker expands its empire of data centers that will demand enough energy to power millions of homes. As part of that deal, announced two weeks ago, OpenAI will in return use Nvidia’s chips to fill out its AI facilities.OpenAI announced it had reached a staggering deal with Oracle, the Larry Ellison-led software giant, to buy $300 billion worth of its cloud computing power over the next five years. Oracle already uses Nvidia chips to power some of its cloud computing options, and it reportedly committed to spending another $40 billion on buying more Nvidia chips to supply OpenAI’s colossal data center in Abilene, Texas.Perhaps the clearest example yet came this week from fellow chipmaker AMD. On Monday, it announced plans to sell billions of dollars worth of computing capacity to OpenAI. And OpenAI, in exchange, would receive a ten percent stake in AMD for just one cent per share, an extremely advantageous deal. Of course, that’s basically just one step removed from AMD outright paying OpenAI to buy its products — which does not evince a sustainable model for the long term future. The deal, in other words, is circular, as are the ones mentioned previously. If the money keeps circling back on itself, is this really an industry that will be as profitable as the hundreds of billions of dollars of investment suggest?Perhaps not. Circular deals — or vendor financing — defined another tech boom that eventually went bust: the dot-com bubble.“In the late 1990s, circular deals were often centered on advertising and cross-selling between startups, where companies bought each other’s services to inflate perceived growth,” Paulo Carvao, a senior fellow at the Harvard Kennedy School, told Bloomberg. “Today’s AI firms have tangible products and customers, but their spending is still outpacing monetization.”Nvidia is especially guilty of propagating this ever-widening web of circular agreements, investing billions into AI companies that also happen to be its biggest customers, like OpenAI.It’s also reportedly planning to expand its existing investment agreement into Elon Musk’s xAI up to $20 billion. xAI already uses tens of thousands of Nvidia chips, and will use some of the cash from the Nvidia investment to buy even more Nvidia chips, Bloomberg reported — which xAI will then use to rent out to other AI firms. Earlier this year, Nvidia bought a seven percent stake in CoreWeave, a “neocloud” business that rents out access to AI chips. Recently, Nvidia agreed to buy $6.3 billion worth of cloud services from CoreWeave — cloud services that are, by the way, powered by Nvidia’s own chips. One of CoreWeave’s customers? OpenAI, which it has agreed to supply $22.4 billion in data center capacity to.With all this cash trading hands, how does anyone make any money? A reality check came this week when The Information reported that Oracle only made a net profit of $125 million in the second quarter quarter off of $900 million in sales from its Nvidia cloud business — a measly 14 percent margin. That’s less profit than many nontech retail companies, the reporting noted. After the news, Oracle’s stock slid by 3 percent.These concerns haven’t stopped OpenAI from clinching investment deals worth around $1 trillion, despite the fact that it’s yet to turn a profit. Many doubt that it will be capable of making its investors’ money back.“OpenAI is in no position to make any of these commitments,” Gil Luria, an analyst at DA Davidson, told the Financial Times. “Part of Silicon Valley’s ‘fake it until you make it’ ethos is to get people to have skin in the game. Now a lot of big companies have a lot of skin in the game on OpenAI.”More on AI: Bank of England Warns of Impending AI DisasterThe post Experts Say This Is a Blinking Warning Sign of AI Bubble appeared first on Futurism.