How very “Here we go round the mulberry bush,” right? Microsoft buys Anthropic’s models; Anthropic runs Claude on Microsoft’s Azure cloud; Anthropic buys Nvidia’s chips; and both Microsoft and Nvidia invest in Anthropic. If that sounds like a big circle going round and round and back again… that’s because it is. And honestly, it’s making me dizzy.
But this trio-loop-de-loop isn’t an anomaly. These days, it’s becoming the dominant business model of the AI industry. Hyperscalers, model labs and infrastructure companies are increasingly forming closed-loop partnerships that function as a kind of AI mutual-assurance pact: everyone is a partner, a vendor, and a customer at the same time.
There are sovereign loops, too: Just yesterday, AMD, Cisco and Saudi-backed HUMAIN formed a joint venture to build up to 1 gigawatt of AI infrastructure in the Saudi Kingdom. Each company is both an investor and an exclusive supplier—AMD and Cisco put money into the joint venture, and the joint venture is then contractually designed to buy AMD’s GPUs and Cisco’s networking gear, all inside HUMAIN’s Saudi data centers. It’s the same circular logic: investors fund the suppliers, the suppliers buy from the investors, and everyone gets to tout massive growth.
And Nvidia isn’t absent from this one either: it also announced a partnership with HUMAIN yesterday —alongside Elon Musk’s xAI—to build a major new AI data center in Saudi Arabia.
Is “loopification” bad? Well, Nvidia has long profited from it, and startups like OpenAI and Anthropic likely would not be where they are today without it. But there are inherent risks: Concentrated power within a tiny group of players; huge debt among companies that haven’t yet proven sustainable business models; blurry real market signals that makes it harder to tell whether there is real demand. What would happen if one of the players in the circle stumbles? And what happens to the players left out of the circle?
Circle games, after all, are fun. But we all know what happens at the end of “Ring Around the Rosy” — they all fall down. Nvidia’s strong quarterly results may have calmed AI bubble fears–for now–but how long can this loop-de-loop business model continue? I don’t know the answer. But at this point, I might need some Dramamine.
With that, here’s more AI news.
Sharon Goldman
sharon.goldman@fortune.com
@sharongoldman
