The AI industry faces criticism for circular financing and customer relationships, reminiscent of dot-com era deals. However, these arrangements, such as OpenAI's funding from Microsoft and Core Weave's debt backed by Nvidia, are more indicative of AI's evolution into a commodity, akin to electricity or natural gas.

This commodification is driven by the fungibility of compute capacity, the massive development costs of AI infrastructure, and the standardization of hardware like Nvidia GPUs. In traditional commodity markets, circular deals are common to finance large-scale projects like mines and pipelines, where a trading firm guarantees future purchases, securing loans and enabling development. This model is now being mirrored in AI.

While such deals can be healthy, fostering innovation and growth, there are instances where they pose risks. Nvidia's commitment to up to $750 billion in financing, for example, highlights the potential for overextension. Understanding these circular dynamics is crucial for navigating the future trajectory of the AI sector.