For a few weeks, the AI trade looked unstoppable. SpaceX jumped 7% in a day, tech executives demanded another hundred billion dollars for data centers, and Nvidia kept describing AI chip demand as insatiable. Then the market turned. CoreWeave, the former crypto mining company that became a major GPU rental business, fell to about a third of its value from the start of the month.
The financing behind the boom is even stranger. Nvidia invests in companies that buy Nvidia GPUs. Those companies borrow more money using the chips as collateral, then rent the hardware back into the same ecosystem. Wall Street calls this circular financing. In plainer English, it is a circle jerk with billions of dollars in debt. Everyone gets to report growth as long as nobody asks where the actual outside revenue is coming from.
That is the problem facing the so-called neocloud companies. They are built around AI workloads, expensive hardware, and borrowed money. Elon Musk reportedly warned that more than 200 of them could fail. CoreWeave's reported $52 billion debt, combined with interest rates near 15%, makes that warning feel less like internet drama and more like basic arithmetic.
Anthropic's proposed public offering adds another layer of absurdity. The company is reportedly seeking a $100 billion valuation while carrying enormous losses and depending on infrastructure providers to keep supplying its computing power. Its filing also discusses models that may improve themselves faster than the company can fully understand. That is a remarkable risk disclosure for a company asking investors to believe in unlimited growth.
The technology is real, but that does not make every company built around it a good business. The internet was real too, and plenty of dot-com companies still deserved to disappear. AI developers are already benefiting from cheaper tokens, better open models, and a brutal fight between providers. A market correction could make hardware cheaper and force investors to care about customers instead of spending plans.
I would like to see the bubble pop, or at least lose enough air for the market to find equilibrium. AI would survive. The useful companies would survive. Maybe then a GPU could go back to being a piece of equipment instead of a financial instrument.
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