“In a circular financing arrangement, I might have a lot of money and you might not have that much money, but I can just give you some of my money that you can then give back to me. And it appears like, wow, you've paid me all this money to buy all these super valuable chips. Circular financing is a concern because essentially all this money can make companies appear to be more valuable than they really are. It can make revenues be higher than they are. It just sort of adds more air to the bubble in a way.”
sputnikintelligence.com
Knutson had just said that people watching the AI industry call arrangements like this circular financing. Saeedy had described Broadcom lending Anthropic money that it can use to pay Broadcom back. Here he explains in plain terms why that pattern worries observers.
Broadcom, in addition to all the things it's doing that we've described with the guarantee and the supplying, they're actually lending money to Anthropic that it can use to pay it back. So the level of interconnection between these companies is really Really fascinating.
This is what people watching the AI industry call circular financing. All this money being handed back and forth between the same companies.
In a circular financing arrangement, I might have a lot of money and you might not have that much money, but I can just give you some of my money that you can then give back to me. And it appears like, wow, like, you know, you've paid me all this money to buy all these super valuable chips. Circular financing is a concern because essentially all this money can kind of make companies appear to be more valuable than they really are. It can make revenues, you know, be higher than they are. It just sort of like adds more air to the bubble in a way.
And there's a level of interconnectedness so that if like the bubble does pop, everybody's sort of tied together. Well,
right. All these interconnections means if one party goes down, then like a lot of other parties could go down. And I'm not saying that's the case here, but from a risk management perspective, right, you should be conscious of what's going on here.
What does it say about the state of the AI industry that financing like this is necessary?