The Big Sip
Image: Wired
OpenAI's infrastructure spending raises questions about financial sustainability across the AI industry.
OpenAI announced on 6 October 2025 at DevDay that it has signed approximately $1 trillion in AI infrastructure deals this year with Nvidia, AMD, Oracle, and SoftBank.
CEO Sam Altman said profitability isn't in his "top 10 concerns."
The Magnificent Seven tech companies now comprise 35% of the S&P 500's total value, with Nvidia and Microsoft alone worth $8.1 trillion.
They're funding each other's AI buildouts through interconnected investments that critics call "circular financing."
Will OpenAI's current $4.5 billion revenue run rate (first half 2025) justify the trillion-dollar infrastructure investment before investors demand actual profits?
Will the first partner to question the economics affect the entire AI investment cycle?
[Analysis] TechCrunch, 8 October 2025: Even after Stargate, Oracle, Nvidia, and AMD, OpenAI has more big deals coming soon — Details AMD granting OpenAI up to 10% equity in exchange for chip development partnerships, while Nvidia invests directly in OpenAI as a shareholder, creating cross-ownership where partners are simultaneously investors, customers, and equity holders in each other.
OpenAI raised a trillion dollars by promising everyone they'll get rich selling to each other.
Here’s The Brew
Nvidia invests in OpenAI. OpenAI buys Nvidia chips. AMD gives OpenAI stock warrants. OpenAI develops AMD chips.
Within hours of Altman's DevDay keynote, the relationships became clear.
Seven companies are cross-investing in each other.
OpenAI needs compute. Nvidia and AMD need validation. Oracle and SoftBank need growth narratives. They swap equity, sign large deals, and Wall Street rewards them with higher valuations.
Nvidia alone jumped to $4.5 trillion in market cap, partly on OpenAI momentum.
Some call it circular financing. Others call it ecosystem building. The key issue is that the seven companies funding AI infrastructure now represent 35% of the S&P 500's value.
The entire market depends on their investments paying off.
If OpenAI's $4.5 billion revenue can't scale fast enough to justify trillion-dollar infrastructure spending, it becomes clear that they funded each other's plans with real capital.
The bubble isn't that AI won't work.
The bubble is seven companies convinced they can sell AI infrastructure to each other at premium valuations forever.
Two Sides, One Mug
Image: Shortform
Pro: Massive infrastructure investments now could position these companies to dominate the AI era for decades. Coordinated spending prevents duplication and accelerates deployment, benefiting the ecosystem faster than fragmented competition.
Con: When seven companies representing 35% of the S&P 500 fund each other's growth through equity and chip deals, the arrangement depends on continuous expansion. The system becomes vulnerable if demand disappoints or any single participant pulls back, potentially triggering valuation corrections across interconnected balance sheets.
Our read: Every major player owns pieces of competitors while selling them products. This creates mutual dependency where nobody can afford to let anyone else fail without destroying their own investments. The structure functions as reciprocal insurance.
Receipt of the Day
[Analysis] Yale Insights, 9 October 2025: This Is How the AI Bubble Bursts
Why it shifts the read: Yale SOM professors identify three ways the bubble pops: a small group securing most deals creates concentration risk, AI-related capital expenditures now exceed US consumer spending as GDP driver (1.1% of growth in H1 2025), and earnings growth between Magnificent Seven and rest of S&P 500 expected to converge in 2026—meaning the valuation gap built on AI hype has no fundamental support once growth rates normalize.
Spit Take
"Seven companies: 35% of S&P 500 value." — Multiple sources, October 2025
Coffee Break Links ×3
CNBC: OpenAI DevDay Live Coverage [Report] — Altman said profitability isn't in his top 10 concerns while announcing ChatGPT hit 800 million weekly users, revealing the disconnect between engagement metrics and business model economics that investors are funding anyway.
VentureBeat: ChatGPT Becomes the New App Store [Analysis] — OpenAI's pivot to platform strategy with Apps SDK and Jony Ive-designed hardware shows the company building an ecosystem before proving unit economics, exactly how Amazon and Apple scaled—except they had profitable core businesses funding the expansion.
NBC News: AI Boom's Circular Deals Raise Bubble Fears [Report] — Details how Nvidia, OpenAI, AMD, Oracle, and CoreWeave are investing in each other while buying each other's products, creating an estimated $20 trillion in collective market value dependent on AI demand that hasn't materialized at revenue scale yet.
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