AI investment is becoming more circular… Why this could be a problem… The layers of the AI ‘value chain’… Matt Weinschenk and Josh Baylin on what you need to know about AI… A Stansberry Research AI tool to build a portfolio…

AI investment is getting more ‘circular’ by the day…

Last month, chip and AI data-server giant Nvidia (NVDA) pledged to invest $100 billion in ChatGPT developer OpenAI, which buys chips from Nvidia. Nvidia said it’s planning to invest in OpenAI to build 10 gigawatts of data centers to help fuel AI growth.

The move raised eyebrows, but it was just the start…

Today, OpenAI announced a multi-year, multi-billion deal that could give it a 10% stake in one of Nvidia’s competitors, chipmaker Advanced Micro Devices (AMD). OpenAI says it will deploy 6 gigawatts of AMD’s chips and hardware, starting with 1 gigawatt in the second half of 2026.

OpenAI has the right to acquire up to 160 million AMD shares, about 10% of its current outstanding stock, at 1 cent per share if certain vesting milestones and conditions are met by both companies. From the deal announcement…

The first tranche [of AMD shares to OpenAI] vests with the initial 1 gigawatt deployment, with additional tranches vesting as purchases scale up to 6 gigawatts. Vesting is further tied to AMD achieving certain share-price targets and to OpenAI achieving the technical and commercial milestones required to enable AMD deployments at scale.

The final level of the agreement is tied to AMD stock reaching $600 per share.

AMD shares spiked around 25% today, to above $200, on the news.

In short, AI spending and the supply chain are growing increasingly incestuous. It’s another sign that the AI boom is possibly turning into a bubble.

And this new Nvidia-OpenAI-AMD relationship is just one example, as Matt Weinschenk, our director of research, explained in his latest This Week on Wall Street report on Friday.

Nvidia also owns nearly 7% of CoreWeave, which uses Nvidia’s chips to build its data centers. And a few weeks ago, OpenAI – which is not profitable, mind you – made a $300 billion deal to buy processing power from Oracle (ORCL) – which sent ORCL shares up 36% after the announcement. (Shares are down 10% since then.)

Downstream of the AI buildout, there’s also news that Meta Platforms (META) CEO Mark Zuckerberg is in talks with Alphabet (GOOGL) to use Google’s AI model to improve Meta’s ad business (a big source of revenue).

And Microsoft (MSFT), which had been a major investor in OpenAI over the years, just made a deal with Anthropic to use its AI technology in Office 365 apps. As Matt wrote, “in the AI industry, money and computing power are flying around every which way.”

This will be a problem if AI doesn’t go as planned…

I (Corey McLaughlin) am talking about if demand or supply doesn’t meet expectations (for whatever reason – maybe energy usage), and the idea of AI without bounds – and the associated profits – isn’t realized.

As Matt explained in This Week on Wall Street, companies like Nvidia, Meta, and Alphabet reinvesting cash that they’re generating now into further AI spending or promises is working – so far. But if revenue doesn’t keep up, Matt cautioned…

These are roundabout deals in which suppliers invest back into their customers, who use the cash to buy more from the supplier.

And this circular nature of AI spending creates risks… It suggests that any crash will be swift and severe.

For industries with a more traditional value chain, changes in the business scale linearly to asset values. If the business prospects for, say, Walmart (WMT) improve a little bit… the stock goes up a little bit.

But this feedback loop makes the system nonlinear… chaotic, even.

For now, it’s driving AI higher. And thanks to the almost religious belief in AI from Silicon Valley’s tech CEOs, the spending can run for a long, long time.

But tread carefully… because if faith in the AI future does falter, the whole thing can fall apart.

The Big Tech “hyperscalers” funding the AI circular pattern – like Microsoft and Alphabet – haven’t pulled back on AI-related spending yet. And from the pace of the deals being made, any crash to reality is going to take some time – even longer than what might “make sense.”

Plus, these are far from the only kinds of investments being made in AI today. Money from investors and venture-capital firms outside the industry is flowing in.

But the increasing number of deals being made by companies already heavily investing in AI with each other is a development you shouldn’t ignore.

What you need to know about AI today…

In Matt’s latest This Week on Wall Street video, he sat down with Stansberry Research’s Josh Baylin to dig even deeper into the AI space.

They discuss who’s actually making money in AI and who’s just burning cash… and break down the entire AI investing ecosystem – from apps like ChatGPT to foundational models like OpenAI, Anthropic, Google, and Meta to the hyperscalers and hardware winners like Nvidia.

You can watch the video on our YouTube page, and be sure to like and subscribe to get more of our free video content.

Matt and Josh also shared how to identify the strengths and weaknesses of the AI “value chain” and what investments or protections to think about. As Matt says…

This is how it goes with young industries and new technologies. The business model is not there yet, but that doesn’t mean it won’t develop. That is what’s great about a modern capitalistic economy. We can fund progress without an immediate reward and end up living in a more productive and richer world down the line.

For now, Josh sees the hyperscalers’ circular spending as a sign of maturity in the industry – though it’s not without risks. At Matt warned, if the AI behemoths don’t meet expectations, we could see a market crash.

Just consider… Today, about as many S&P 500 Index stocks were down as up. But AMD’s double-digit gain and a host of other AI names trading higher boosted the benchmark index and the Nasdaq Composite Index into positive territory.

However, based on history (like the dot-com bubble days that are coming more into play), if the AI hype goes bust, we could see generational buying opportunities in high-quality stocks, including businesses that may be long-term AI winners. It’s something to keep an eye on.

Some more AI news…

As we’ve said in these pages before, we believe AI technology is going to change the world.

That’s why Stansberry Research launched the New Engine of Wealth (“N.E.W.”) System to make AI work for you. Each quarter, this AI system searches for the best businesses in the market… stocks that meet our strict capital efficiency, financial, and valuation criteria.

We enlisted the help of our analysts, experts in computer science, and even a PhD in astrophysics to create a system that identifies the best companies to hold to deliver market-beating long-term returns. And it crushed traditional portfolio strategies in back testing.

If you want to see how you can build a simple, profitable, AI-aided portfolio, you can learn more here.

Stansberry Alliance members and Total Portfolio subscribers already have access to The N.E.W. System here. The product also includes access to our new StansberryGPT, which offers a way to “talk about” any stock graded by our proprietary Stansberry Score tool.

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In today’s mail, feedback on Dan’s Friday essay, “The Truth About Lemmings,” in which he warned about the pitfalls of getting caught up in AI hype… Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

“It took guts to stay with my 401k investments during the 1987 market collapse. I’m glad I didn’t sell anything since it more than recovered by 2010 when I retired. My only loss was in some Lehman bonds I purchased for my personal account.” – Subscriber Alan K.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
October 6, 2025