Late into the dotcom era, companies realized they could create profits without having to actually have cash change hands.
Rather, they could announce a massive deal that would take years to play out. And rather than spread out the costs, it could be booked as revenues in the quarter of the announcement.
Not profits, but revenue all the same. That accounting trend was a hallmark of the boom… and the bust… of tech shares 1998-2000.
Today, we’re seeing the beginnings of that trend in AI – this time at scale.
On Monday, Nvidia shares popped nearly 4% on news that they would invest up to $100 billion in OpenAI.
That’s just part of the bizarre trend where large-cap AI names are now announcing deals with each other – and seeing an immediate boost to their company’s valuation – well before any money changes hands.
Today’s major AI players are essentially a closed-loop economy (Source: Kakashii via X)
We know Nvidia’s need to sell chips is crucial for keeping its earnings engine going. The “investment” in OpenAI will allow OpenAI to buy Nvidia chips. And Oracle software and services – which in turn increases demand from Nvidia’s chips.
Round and round it goes.
You’re free to draw your conclusions. Just keep mind, in 2000 the jig ended badly for a whole class of “dotcom” stocks.
~ Addison
