I still don't really understand this "circle" issue. If I fix your bathroom and in return you make me a new table, is that an incestuous circle? Haven't we both just exchanged value?

The circle allows you to put an arbitrary "price" on those services. You could say that the bathroom and table are $100 each, so your combined work was $200. Or you could claim that each of you did $1M work. Without actual money flowing in/out of your circle, your claims aren't tethered to reality.

You don’t think real money is changing hands when Microsoft buys Nvidia GPUs?

What about when Nvidia sells GPUs to a client and then buys 10% of their shares?

Their shares will be based on the client's valuation, which in public markets is externally priced. If not in public markets it is murkier, but will be grounded in some sort of reality so Nvidia gets the right amount of the company.

My point was that's an indirect subsidy. NVIDIA is selling at a discount to prop up their clients.

It's a soft version of money printing basically. These firms are clearly inflating each other's valuations by making huge promises of future business to each other. Naively, one would look at the headlines and draw the conclusion that much more money is going to flow into AI in the near future.

Of course, a rational investor looks at this and discounts the fact that most of those promises are predicated on insane growth that has no grounding in reality.

However, there are plenty of greedy or irrational investors, whose recklessness will affect everyone, not just them.

For Nvidia shares: converting cash into shares in a speculative business while guaranteeing increasing demand for your product is a pretty good idea, and probably doesn't have any downsides.

For the AI company being bought: I wouldn't trust these shares or valuations, because the money invested is going on GPUs and back to Nvidia.