Bridgewater CIO Greg Jensen says Wall Street is misreading the frantic wave of AI circular financing deals sweeping through the tech sector.
In a new interview with Norges Bank Investment Management CEO Nicolai Tangen, Jensen notes that the vendor arrangements surrounding Nvidia and its rivals are not signs of froth but rather the mechanics of survival in a supply-starved industry.
The Bridgewater executive pushes back on claims that vendor financing is a bubble signal, noting that AI firms are employing the strategy for defense, and not financial engineering.
“The chips are so scarce that Nvidia is now in this position, and this goes to the vendor financing. People look at this vendor financing and think it is because of normal bubble dynamics. This is how they are going to get their revenue. Not at all. Nvidia could get as much revenue as it wants.
They have no problem selling these chips, but they do not want to set up a system where they lose their competitive edge. Their problem is that Google is a true competitor. Google is trying to go the whole stack all the way down to the chips. They do not want Google to win, or they do not want Google to be the final win, so they are trying to control the ecosystem.”
He compares Nvidia’s current position to one of the most powerful industrial empires of the past.
“They are like Standard Oil in the Gilded Age, trying to create monopolistic control on things, so create their own ecosystem and sell their chips to people who need their chips, who will not create an alternative to their chips.”
Jensen says the industry is splitting into competing AI super-ecosystems, each fighting to lock in customers before capacity disappears. He describes the rush of AI deals as a scramble for survival rather than a race for headlines.
“So what you are seeing is a design of the ecosystem where there is a Google ecosystem, there is somewhat of an Amazon ecosystem. And then there is an Nvidia-controlled ecosystem that has, let us say, OpenAI, certain models on the top, and goes all the way through all the steps that Google has.
And that is what you are seeing when you are seeing all these deals, is everybody has to lock up. Who do I partner with? Where am I going to get my chips and power? And if I do not do it, I am going to die.”
In October, banking giant JPMorgan Chase said that the circular deals in AI are necessary to take the current tech cycle to exit velocity.
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