James Li digs into whether the AI boom—driven by Nvidia, OpenAI, Microsoft, Amazon, Oracle, and CoreWeave—is a breakthrough or a bubble built on trillion-dollar circular financing loops. He compared today’s GPU-and-cloud-fueled frenzy to Iceland’s forgotten banking collapse that imploded overnight.
Li explains the circular funding loop in Icelandic banks that grew to a monster value more than 10 times the country’s GDP. Cash was injected into the market to generate artificial demand for their stocks. And as the stock price increased, money was borrowed against the increased valuation of the company, billions of dollars, and reinvested, creating an artificial demand.
AI investments in the US are on the same trajectory as AI-related stocks registered 75% of the S&P 500 returns, 80% of earnings growth, and 90% of capital spending growth. Meanwhile, AI investments accounted for nearly 92% of the US GDP growth this year. It is driven by circular funding. Much of it is financed with debt and could add up to $5 trillion. Sam Altman’s OpenAI wants to spend $1.4 trillion, but they only have $13 billion in revenue! OpenAI is seeking backing from the government.
Note: vuldgar language warning
James Li
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