# AI’s Circular Financing Model **URL:** \ **Category:** Macro Economic Trends and Risks\ **Created:** [October 24, 2025, 9:10pm UTC](https://discussion.fool.com/t/ai-s-circular-financing-model/121797 "2025-10-24T21:10:55Z")\ **Posts on this page:** 7\ **Page:** 1
**Author:** ![intercst](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/intercst/32/1543_2.png) [@intercst](https://discussion.fool.com/u/intercst)\ **Post date:** [October 24, 2025, 9:10pm UTC](https://discussion.fool.com/t/ai-s-circular-financing-model/121797/1 "2025-10-24T21:10:55Z")
How is this different from check kiting? [![](https://us1.discourse-cdn.com/motleyfoolfree/original/3X/6/5/65ca4a2fb601be645a869aabe211ae72d65acb18.jpeg "Is AI’s Circular Financing Inflating a Bubble?") ](https://www.youtube.com/watch?v=NbL7yZCF-6Q) intercst ---
**Author:** ![captainccs](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/captainccs/32/3775_2.png) [@captainccs](https://discussion.fool.com/u/captainccs)\ **Post date:** [October 25, 2025, 9:51am UTC](https://discussion.fool.com/t/ai-s-circular-financing-model/121797/2 "2025-10-25T09:51:24Z")
> [@intercst](#): > > How is this different from check kiting? All economies are circular. You make some money and spend it, so does everyone else. That’s why it’s called money in circulation! Most people don’t yet have much use for AI so the AI Circulation Universe is still quite small. It happens with every new technology to some point or other. The Captain ---
**Author:** ![DrBob2](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/drbob2/32/3456_2.png) [@DrBob2](https://discussion.fool.com/u/DrBob2)\ **Post date:** [October 25, 2025, 12:26pm UTC](https://discussion.fool.com/t/ai-s-circular-financing-model/121797/3 "2025-10-25T12:26:12Z")
> [@intercst](#): > > How is this different from check kiting? In another parallel, don’t the auto companies such as Ford and GM offer financing to people so they can buy cars? DB2 ---
**Author:** ![WendyBG](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/wendybg/32/67464_2.png) [@WendyBG](https://discussion.fool.com/u/WendyBG)\ **Post date:** [October 25, 2025, 3:33pm UTC](https://discussion.fool.com/t/ai-s-circular-financing-model/121797/4 "2025-10-25T15:33:46Z")
@intercst I posted about this earlier this week. The real concern is that the internal AI ecosystem spending is orders of magnitude greater than the end-user buying of the service. > [@AI investments vs. end-user consumer spending](https://discussion.fool.com/t/ai-investments-vs-end-user-consumer-spending/121751): > > Earlier today, I posted an article from the Wall Street Journal that showed the circular deals of AI companies with each other. I followed up to see how much actual end-user consumer spending compares with the AI build-out spending. The AI companies are buying and selling actual goods and services to each other as well as investing in each other. Nvidia and AMD sell chips. Oracle sells computers. CoreWeave is an AI-cloud infrastructure company that rents out data-center capacity. CoreWeave’… The “check kiting,” as you call it, generates a huge amount of GDP growth and most of the growth in the S&P500. A lot of the money comes from profitable corporate giants that can finance out of current cash flow (Amazon, Google, Microsoft) but many are borrowing. Morgan Stanley estimates a **$1.5 trillion** “financing gap” in capital expenditures for AI hardware and data centers between 2025 and 2028 that will need to be met by external capital, with **$800 billion** expected to come from **private credit** (a form of debt). > **[‎Google Gemini](https://gemini.google.com/app/f449c3cb48c763d7)** > > Meet Gemini, Google’s AI assistant. Get help with writing, planning, brainstorming, and more. Experience the power of generative AI. I am very concerned about this. It reminds me of the debt-financed infrastructure build-out before the dot-com crash. The dot-com crash caused a stock market crash but not a financial crisis. An AI bubble bursting would certainly pop the S&P500. Is the scale of borrowed money enough to also cause a financial crisis? Probably not, but the numbers are large and nobody knows who is naked until the tide goes out. Wendy ---
**Author:** ![intercst](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/intercst/32/1543_2.png) [@intercst](https://discussion.fool.com/u/intercst)\ **Post date:** [October 25, 2025, 4:11pm UTC](https://discussion.fool.com/t/ai-s-circular-financing-model/121797/5 "2025-10-25T16:11:25Z")
> [@WendyBG](#): > > An AI bubble bursting would certainly pop the S&P500. Is the scale of borrowed money enough to also cause a financial crisis? Probably not, but the numbers are large and nobody knows who is naked until the tide goes out. AI focused high grade debt is $1.2 trillion as of Oct 2025. The total debt market is $338 Trillion. Like Bitcoin, this is lost in the roundoff. intercst ---
**Author:** ![WendyBG](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/wendybg/32/67464_2.png) [@WendyBG](https://discussion.fool.com/u/WendyBG)\ **Post date:** [October 25, 2025, 8:13pm UTC](https://discussion.fool.com/t/ai-s-circular-financing-model/121797/6 "2025-10-25T20:13:12Z")
> [@intercst](#): > > AI focused high grade debt is $1.2 trillion as of Oct 2025. The total debt market is $338 Trillion. @intercst what fraction of outstanding debt did Lehman Brothers hold when its bankruptcy triggered the 2008 Great Financial Crisis? The question is not the percentage of total debt but whether the failure pulls on an unravelling interconnected web of debt like pulling yarn out of a knitted sweater. That’s why AI’s circular financing model is potentially so risky. The Federal Reserve recognizes the dynamic of snowballing instability. That’s why they bailed out Silicon Valley Bank’s non-insured customers in 2023. The peak of this bail-out can be seen as the Fed printed fiat money to do it. > **[Assets: Total Assets: Total Assets (Less Eliminations from Consolidation):...](https://fred.stlouisfed.org/series/WALCL)** > > Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level Wendy ---
**Author:** ![captainccs](https://sea2.discourse-cdn.com/motleyfoolfree/user_avatar/discussion.fool.com/captainccs/32/3775_2.png) [@captainccs](https://discussion.fool.com/u/captainccs)\ **Post date:** [October 25, 2025, 8:49pm UTC](https://discussion.fool.com/t/ai-s-circular-financing-model/121797/7 "2025-10-25T20:49:49Z")
> [@DrBob2](#): > > In another parallel, don’t the auto companies such as Ford and GM offer financing to people so they can buy cars? > [@WendyBG](#): > > I am very concerned about this. It reminds me of the debt-financed infrastructure build-out before the dot-com crash. Yep! That’s how GE and others almost went broke in 2007-08. A sale is not a sale until the check is in the bank and it does not bounce. The Captain