Reports that Nvidia is in talks to give financial guarantees of almost $250 billion (€217 billion) to OpenAI for a massive data center project show two sides of the artificial intelligence boom.

On one level, it shows the monumental scale of AI's financial muscle and potential. On another, it shows the risks of a so-called "circular" financing system at the core of the AI ecosystem. If one domino falls, would others fall with it?

"The interconnected nature of the AI ecosystem is real," Gary Tan, portfolio manager at Allspring Global Investments, told DW. "But near term risks are mitigated by the strong balance sheets, cash flows and credit quality of the major providers funding the buildout."

Jan Frederik Slijkerman, a tech sector strategist at ING, agrees that the exceptionally strong financial positions of big tech companies such as Nvidia, Microsoft, Amazon and Alphabet (Google parent company) mitigates against the risks.

He says the degree of collaboration regarding AI is "fascinating" but does not see a "a systemic industry-wide risk arising from the observed interdependencies".

The circular model

Circular financing typically works as follows: a company pays money to another for a product or deal, or invests in that company or provides a loan or lease. Then that company buys the products or services of the first company.

It can be seen across the spectrum of AI deals.

For many, the moment the AI revolution began was when ChatGPT, developed by OpenAI, was launched in November 2022. The chatbot's capabilities brought AI into the mainstream. Its success quickly attracted a massive $10 billion investment from software giant Microsoft, enabling it to develop more powerful models.

In return, OpenAI became a key customer for Microsoft's cloud services, which it is investing ever more heavily into as the AI boom gathers momentum.

It set the template for future deals. Amazon and Alphabet began investing billions into OpenAI's rival Anthropic, which has built the hugely successful Claude chatbot. In return, Anthropic uses Amazon's web services and Google's cloud services as well as buying its chips.

Nvidia: King of the Jungle

Yet that is all relatively small potatoes compared with what AI computing giant Nvidia has brought to the table.

"Nvidia sits at the center of the AI ecosystem, acting not only as a technology supplier but also as a strategic investor helping accelerate adoption of its platform," says Tan.

Slijkerman says Nvidia plays a vital role, as it contributes to the development of a variety of new businesses, from healthcare to autonomous driving. "Its investments help support the growth of the broader AI ecosystem while also facilitating the deployment of AI infrastructure," he says.

The story that Nvidia is in talks to provide $250 billion to OpenAI, first reported by The Wall Street Journal, would be just the latest megadeal the $4.6 trillion company has bankrolled.

Jensen Huang's company is at the center of the artificial intelligence boom thanks to its industry-leading chips. Since 2024, it has invested heavily in multiple AI start-ups, including Open AI, Mistral and Elon Musk's SpaceX. In turn, these companies all are committed users of Nvidia's chips.

It has also begun to invest heavily in so-called 'neocloud' providers, such as CoreWeave and Nebius. These start-ups rent out cloud space for AI computing. As well as investing, Nvidia itself is also purchasing cloud space from the firms.

Nvidia is stepping up its spending and dealmaking in 2026 too. It struck a partnership with South Korean conglomerate SK Group recently, worth potentially $500 billion in business.

Throughout 2026, such circular dealmaking has become even more pronounced across the sector. OpenAI has struck close to $1 trillion worth of deals with the likes of Microsoft and Advanced Micro Devices (AMD), agreeing to become one of AMD's biggest shareholders.

Microsoft and Nvidia have also invested heavily in Anthropic, with Anthropic in turn agreeing to step up its purchases of cloud capacity and chips from both.

Advantages and risks

The scale of the cross-pollination can bring advantages. "Interconnected ecosystems can accelerate innovation by aligning incentives across infrastructure providers, model developers, application companies and end users, helping new technologies scale faster," says Gary Tan,.

Slijkerman says he does not see the circular trend as a form of "financial engineering". "These relationships make strategic sense because they help participants expand their market reach and accelerate adoption," he says. "They can also create mutual financial benefits."

Yet there are risks. Fears of an AI 'bubble' continue to stalk global markets. Tech and semiconductor stocks fell sharply last week amid doubts over profitability in the sector, relative to the vast sums being invested in data centers and other AI-related spending.

If AI revenues do not grow sufficiently, companies that have received funding from bigger players might face financial challenges. In turn, they may stop buying the bigger company's products and their valuations will fall.

Some analysts have drawn comparisons to the dot-com bubble and subsequent crash, which happened after valuations surged in the early days of the internet. Circular financing was a factor in that crisis, too, but many observers reckon the AI boom is ultimately built on more solid foundations.

"While some individual companies or business models may ultimately disappoint, the broader investment cycle appears to be supported by genuine demand and real economic value creation," says Slijkerman.

Tan agrees and says a bigger risk in future problems is interest rates. He thinks if interest rates rise, it could have a significant impact on many AI companies as they will be penalized by the time they become profitable.

"AI cash flows are long dated, so the direction of the yield curve may ultimately matter more than the availability of capital," he says.

Edited by: Kristie Pladson