Well, that serves as a better transition to the next chart than I anticipated. There are suspicions that this entire situation has evolved into a kind of circular money machine. The quest for growth and justifying share prices, investments, and valuations seems to lead to money constantly changing hands, creating a mere illusion of activity.
So, Joe, I’m about to show you a chart from Bloomberg. It’s quite complex, even for me, but the purpose isn’t so much to analyze it in detail. Instead, it’s more about capturing the essence of the data. This chart illustrates a significant amount of interconnections, particularly in the realm of A.I.
For those not seeing it, this chart places Nvidia at the center. It reveals that nearly all parties are invested in each other. Nvidia invests in OpenAI, which, in turn, invests in CoreWeave, a cloud data center company that purchases chips from Nvidia. This creates a cycle where revenue is recycled through these interconnected investments.
In essence, this represents a web of relationships where payments and investments flow bidirectionally. This financial interplay resembles the complexity seen in the lead-up to the 2007-2008 financial crisis.
During the dot-com bubble, many companies, like Yahoo and Cisco, had real revenue but were still influenced by financialization. They raised funds through I.P.O.s, which were often redirected toward ads on Yahoo or Cisco equipment. When the I.P.O. market slowed, these companies faced a revenue collapse, highlighting the fragility of what appeared to be sound businesses.
Regarding the current A.I. boom, while Nvidia is indeed a genuine company with real revenue and profits, concerns arise about the sustainability of profits and revenues in this context. There might be inflated valuations, but the fear is that these revenues could ultimately prove unsustainable.
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