AI Has a Cargo Cult Problem
October 17th, 2025Via: Financial Times:
Is it just a Ponzi scheme? That is the question that currently haunts American tech — and wider markets — as the valuation of artificial intelligence-linked groups soars to evermore eye-popping heights.
Indeed, calculations by the FT suggests that ten lossmaking AI start-ups — such as OpenAI, Anthropic and Elon Musk’s xAI — now command a collective valuation of close to $1tn, while venture capital has poured $161bn into AI overall this year.
More startling still, few of these entities expect to turn a profit anytime soon — and these valuations are being boosted by variants of cross-cutting vendor financing, like recent deals between OpenAI, Nvidia, Oracle, AMD and Broadcom.
The net result is a pattern of circular flows that echo some of the hairball of interconnections that emerged between banks and insurance companies via credit derivatives before 2008. And those, remember, resulted in unseen concentrations of risk — and subsequent contagion when the bubble burst.
