Circular financing ain’t what it used to be

2026-07-27 · Source: Marcus on AI · Field: Finance & Economics — Capital Markets & Investment Management, Corporate Finance & Treasury · Depth: Fundamental Awareness, quick

Summary

On September 10, 2025, Oracle announced a \$300 billion deal with OpenAI, leading to a 43% stock surge and a \$100 billion increase in Larry Ellison's net worth. Despite initial market enthusiasm, the author warned of a "Peak Bubble." Nine months later, Oracle's stock, which closed at \$307 and peaked at \$328, now hovers around \$120, reflecting growing market skepticism towards "circular financing." This shift is evident in the recent reaction to Nvidia's consideration of a \$250 billion backstop for an OpenAI-led data center. Unlike Oracle's initial bounce, Nvidia's stock dropped over 4.5% in early trading, indicating the market now views such deals as desperation. Other companies like SpaceX have also seen significant drops, while Apple has overtaken Nvidia. Creditors are also wary of off-balance-sheet and "creative financing" in the GenAI sector, suggesting the boom, sustained by hope and circular financing, may be unsustainable.

Key takeaway

For investors evaluating AI sector opportunities, recognize that market sentiment has dramatically shifted. Your due diligence must now prioritize genuine earnings and sustainable business models over large-scale financing guarantees. Be wary of deals labeled "creative financing" or those involving significant backstops, as these are increasingly viewed as signs of desperation. The era of funding AI solely on hope and circular arrangements appears to be ending, demanding a more critical financial assessment.

Key insights

Market sentiment has shifted from embracing to scrutinizing large-scale "circular financing" in the GenAI sector.

Principles

• Market enthusiasm for AI deals is waning.
• Circular financing models face increasing skepticism.
• Profitability, not just hope, is now demanded.

In practice

• Evaluate AI investments for genuine earnings potential.
• Scrutinize deals involving significant financing guarantees.
• Monitor market reactions to "creative financing" schemes.

Topics

• Circular Financing
• AI Investment
• Market Sentiment
• Oracle
• NVIDIA
• OpenAI
• Corporate Finance

Best for: Entrepreneur, Investor, Executive, Tech Journalist

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Editorial summary, takeaway, and curation by AIssential. Original article published by Marcus on AI.