The already tangled world of artificial intelligence partnerships tightened further this week as OpenAI struck a deal with AMD, just days after securing a $100 billion investment from Nvidia. The agreement, announced Monday, sent AMD shares soaring 23% and heightened concerns that the AI boom is being propped up by circular financing rather than genuine customer demand.

Under the terms, OpenAI received warrants for up to 160 million AMD shares, effectively making it a 10% shareholder. That unusual arrangement blurs the lines between customer and financier, creating what investors call “vendor financing” — a mechanism reminiscent of the dot-com era.

Nvidia, now the world’s most valuable company, also competes with AMD and Oracle — both of which have recently inked multibillion-dollar deals with OpenAI. The dense overlap highlights how a handful of companies, including Microsoft and Google, are simultaneously investing in and selling services to OpenAI, the world’s most valuable private firm at a reported $500 billion valuation.

The financial engineering has raised alarms among analysts. Mike O’Rourke, chief market strategist at JonesTrading, warned that the echoes of the late-1990s telecom bubble are unmistakable, when Cisco, Nortel and Lucent used similar financing strategies to inflate demand before collapsing under debt. Lucent, once the biggest “picks-and-shovels” play in telecom, never recovered.

Skeptics argue today’s frenzy is worse. Julien Garran of MacroStrategy Partnership recently labeled AI “the biggest and most dangerous bubble the world has ever seen,” estimating the capital misallocation at 17 times the dot-com crash and four times the 2008 housing collapse. He noted most large language model (LLM) ventures are unprofitable, propped up only by asset round-tripping — particularly via Nvidia.

Despite such warnings, banks point to a crucial difference: today’s Big Tech backers are vastly stronger financially than their dot-com predecessors. Still, real-world returns remain thin. A recent MIT survey of 300 firms found 95% reported no payoff from AI investments, even as hype continues to inflate valuations.