Simple circular financing explained: it’s only bad if the AI companies being invested in ends up bombing

I wanted to explain my thoughts on this whole “circular financing” term that keeps getting shared when people start talking about the bubble. And sort of explain the bull/bear cases. Feel free to share additional opinions. In essence, a very simple and simplified example (not numerically accurate) using MSFT and OpenAI: 1. MSFT invests $30Bn in OpenAI. 2. OpenAI pays MSFT $30Bn with the money from MSFT. 3. On MSFT’s books, they now have $30Bn additional revenue + $30Bn OpenAI Stake. Basically looks like an additional $30Bn has been reported in their books from thin air BECAUSE that $30Bn invested in OpenAI is reported as an investment rather than an expense. Bull case: If everything goes well, OpenAI continues to trade at an equal or even higher value than what MSFT paid for it, then MSFT legitimately made money even from that circular financing deal, because their 30Bn stake in OpenAI is effectively synonymous with cash and not lost. Bear case: If OpenAI, say, never turns a profit and eventually goes bankrupt, with investors valuing it at $0, then this circular financing argument is realized. MSFT and all the other tech giants seemingly having trillions combined in stakes in those large AI companies could end up having those investments worth $0 on their balance sheets. On top of that they will lose a big source of their current revenue.