AI stocks frenzy Why experts worry about a repeat of the dotcom bubble

OpenAI's multibillion-dollar deals with the chipmakers Nvidia and AMD are the latest reason for pause about the sustainability of vast investments in artificial intelligence. What do these deals say about the state of the AI stock market?

- Dan Milmo Global technology editor

Some commentators are concerned by the circular nature of the deals. Under the terms of the Nvidia transaction, OpenAI will pay Nvidia in cash for chips, and Nvidia will invest in OpenAI for non-controlling shares.

James Anderson, a leading British tech investor, said he was concerned by parallels with vendor financing, where a company provides financial support to a customer buying its products - a precarious scenario if those customers have overly optimistic business projections. Vendor financing was one of the hallmarks of the turn-of-the-millennium dotcom bubble.

"It's not quite like what many of the telecom suppliers were up to in 1999-2000 but it has certain rhymes to it," he said. "I don't think it makes me feel entirely comfortable from that point of view."

The AMD deal also enmeshes OpenAI with another chipmaker alongside Nvidia. Under the deal OpenAI will use hundreds of thousands of AMD chips in its data centres - the central nervous systems of AI tools like ChatGPT - and will have an opportunity to buy 10% of AMD.

All of this is being driven by the thirst of OpenAI and its peers for as much computing power as possible to drive their models to ever greater performance breakthroughs - as well as to meet demand.

Neil Wilson, the UK investor strategist at Saxo, an investment bank, said transactions such as Nvidia and OpenAI's all pointed to a situation that "looks, smells and talks like a bubble".