Circular financing ain’t what it used to be

Nine months ago, on September 10, 2025 Oracle announced what seemed to many to be the deal of the century! A $300 billion deal with OpenAI.

The market went wild. Oracle stock briefly went up by 43% (and ultimately even a bit higher). Larry Ellison’s net worth briefly leapt by $100 billion. The Wall St. Journal gushed:

The whole thing never made sense though. The next morning, inn an essay called Peak Bubble I warned that

Yet Oracle continued to rise!

But not for long. Its stock stood at $307 per share at the close of trading on September 10, and briefly closed as high as $328 ten days later. Now, as I write this, it’s hovering around $120.

In the intervening nine months, the market has grown wary of all this circular financing stuff. Mocking illustrations like this one (from yesterday) have become widespread:

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All of which brings me to the present. Yesterday, news broke that Nvidia is considering offering a $250 billion backstop for an OpenAI-led data center. Which led last night to considerable skepticism

and this morning led to a dramatically different reaction from the market, nothing like the bounce like Oracle had back in September. Instead, in the first couple hours of trading Nvidia is down over 4.5%:

The market isn’t reading the latest potential Nvidia-OpenAI deal as good news; they are reading it as desperation. As one investor put it to me in an email this morning, “[the deal] seems incredibly desperate by both parties. Two drunks leaning on each other to stand up.”

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Meanwhile, Apple, the butt of jokes for a while because “it didn’t invest in enough AI” just overtook Nvidia

and SpaceX, which tried to position itself as an AI company is in free fall, dropping over 3% today, and by over 25% in the last month, more than 50% from its June high of 225:

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Meanwhile, creditors are getting pretty leery of the whole thing, too, as Axios just reported:

And then there’s all the off-balance-sheet financing that is coming to light. And the sudden need for so-called “creative…