circular deal
In plain wordsA business arrangement in which an AI chip or cloud supplier invests in, or lends to, a customer that then spends the money buying the supplier's own products.
An arrangement in which money flows in a loop among AI companies: a supplier of chips or computing capacity invests in, lends to or grants equity to a customer, which then uses the funds or resulting commitments to buy the supplier's products, so that revenue and valuations on both sides rest partly on each other. Prominent examples from 2025 include Nvidia's announced plan to invest up to US$100 billion in OpenAI alongside OpenAI's commitment to deploy about 10 gigawatts of Nvidia systems; OpenAI's agreement to deploy AMD chips in exchange for warrants that could make it one of AMD's largest shareholders; and a reported US$300 billion computing contract between OpenAI and Oracle. Defenders describe such deals as ordinary vendor financing that secures scarce supply; critics compare them to the vendor financing of the dot-com era, warning that they inflate apparent demand and concentrate risk.
Analysts discounted the chipmaker's backlog because so much of it came from circular deals.
Origin
The label 'circular' spread through financial journalism in October 2025, used by outlets including NBC News, The Wall Street Journal and The New York Times, after a cluster of such deals involving OpenAI in September and October 2025.
Usage note
Central to debate over an AI bubbleAI bubble, n.: The worry that investors are pouring far more money into AI companies, chips and data centers than AI will earn back soon, so that prices could crash as in the dot-com bust of 2000.; a sharp sell-off in AI and chip stocks in late June 2026 revived that debate, though analysts disagreed on whether it marked a bubble bursting.
Related
- AI bubbleAI bubble, n.: The worry that investors are pouring far more money into AI companies, chips and data centers than AI will earn back soon, so that prices could crash as in the dot-com bust of 2000.
- neocloudneocloud, n.: A newer kind of cloud company that mainly rents out powerful AI chips, rather than the full range of computing services that giants like Amazon or Microsoft sell.
- StargateStargate, prop. n.: A giant venture announced in 2025 by OpenAI, SoftBank and Oracle to build data centers in the United States for training and running AI, with a pledged $500 billion.
- AI data centerAI data center, n.: A building or campus packed with AI chips, power equipment and cooling, built to train and run AI models. The biggest use as much electricity as a city.
- AI hypeAI hype, n.: Exaggerated claims about what AI can do or will soon do, made to attract money, attention or customers, which can mislead the public and policymakers.
- computecompute, n.: The raw computing power used to train and run AI, usually measured by how many specialized chips are used and for how long. With data and algorithms, it is a main driver of AI progress.
Sources
- Wile, R. (2025). The AI boom's reliance on circular deals is raising fears of a bubble. NBC News, October 2025.
- Wikipedia contributors. AI bubble. Wikipedia (accessed October 2026). en.wikipedia.org/wiki/AI_bubble
- Gigazine (2026). [Report on the AI and tech stock sell-off]. 24 June 2026. gigazine.net/gsc_news/en/20260624-ai-tech-stock-sell-off
Mentioned in
AI bubbleAI bubble, n.: The worry that investors are pouring far more money into AI companies, chips and data centers than AI will earn back soon, so that prices could crash as in the dot-com bust of 2000., StargateStargate, prop. n.: A giant venture announced in 2025 by OpenAI, SoftBank and Oracle to build data centers in the United States for training and running AI, with a pledged $500 billion., hyperscalerhyperscaler, n.: One of the few giant technology companies — such as Amazon, Microsoft, Google and Meta — that run vast networks of data centers and spend most of the money that builds AI computing., neocloudneocloud, n.: A newer kind of cloud company that mainly rents out powerful AI chips, rather than the full range of computing services that giants like Amazon or Microsoft sell.