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Jim Cramer warns AI firms risk “back in 2000” circular financing
The concern centers on Nvidia and other AI players moving large sums to finance data-center buildouts, while investors worry the demand may not translate into profits.
Yahoo Finance says renewed investor fears are spreading about “circular financing” in the AI buildout, with attention focused on Nvidia as it expands its role in the chip and infrastructure supply chain.
The piece points to Nvidia’s late-July announcement of a $500 billion partnership with South Korean conglomerate SK Group to support AI infrastructure, including factories and memory supply, and it also cites negotiations with OpenAI for a $250 billion backstop intended to enable a new data center project in southern Ohio, according to the Wall Street Journal.
Yahoo Finance reports that critics worry some arrangements in which Nvidia and other AI companies finance firms or projects could artificially boost demand for their products. The article adds that if the financed projects do not generate profits, the strategy could intensify losses for companies that have staked future earnings on AI spending.
In the report, Jim Cramer is quoted discussing the risk that if the market stops funding data centers and the companies lack the money or are not paid, the industry could face a scenario he likened to 2000, with analysts drawing comparisons to the dot-com era, when capital-starved startups struggled after tech stocks fell.