Every few years, markets decide to pull a magic trick. They take something perfectly ordinary, spin it around fast enough, and—voilà—everyone insists it’s new. Well, here we go again.
This time the excitement is over AI. Not the technology (which is real), but the financing behind the technology—starting to look less like investment and more like a carnival ride where the floor drops out and you hope you’re glued to the wall long enough to survive.
And yes, I’ve seen this movie. I still have the VHS tape.
Let’s talk about “circular finance.” A polite phrase meaning: Tech Company A gives money to Tech Company B, which uses that money to buy products from Tech Company A. If this sounds familiar, it should. The dot-com era perfected the maneuver back when everyone convinced themselves banner ads were going to replace oxygen.
These days, instead of banner ads, we’ve substituted GPUs, cloud credits, and compute leasing contracts. Different props, same choreography.
A little history never hurt anybody
Back in the late 1990s, internet startups used venture capital dollars to buy ads from other internet startups. Revenues went up, valuations followed, and Wall Street cheered—right up until the whole thing collapsed like an overbaked soufflé.
Today, we’ve simply updated the props. Multi-billion-dollar checks are flying between the same six companies like a backyard football game where everyone keeps throwing the ball back to their cousin. Some of these investments are strategic. Some are genuine bets on the future. And some—let’s be honest—look like everyone trying to make each other’s financial statements look a little rosier.
For now, Wall Street is pretending this is totally fine.
The new circular economy (not the one you’ve heard about)
Companies are becoming each other’s biggest customers, lenders, partners, and promoters. If you’re wondering whether this inflates revenue numbers, the answer is: of course it does. An accountant would call it “non-independent demand.” I call it the town square version of the florist buying cookies from the bakery that buys shirts from the tailor that buys flowers from the florist.
Round and round it goes. And as long as the music is playing, no one wants to admit they’re dizzy.
Now, does this mean we’re in a bubble? No—not the implosion-on-contact kind. Unlike the dot-com era, today’s giants actually make money. Rivers of it. Apple, Amazon, Meta, Nvidia—these firms could lose $5 billion under the sofa cushions and not notice until spring.
The danger isn’t insolvency. It’s illusion: growth that looks explosive because the same dollars are bouncing around the room like a ping-pong ball.
The “because Bill said so” part
Here’s what actually matters:
First, watch the end-user. If real companies and real consumers keep adopting AI tools—not just tech companies transacting with each other—then the boom has a solid foundation. That’s what separated the smartphone from the Segway and the internet from whatever VR headset is gathering dust in the garage.
Second, don’t confuse investment cycles with market health. Every major innovation starts with overbuilding. Railroads, electricity, fiber optics—investors always overshoot before reality catches up. AI isn’t immune to the pattern.
Third, understand concentration risk. The Magnificent 7 now make up roughly 37% of the S&P 500. I’ve lived through decades where the “Top 5” were chemical companies. Nothing stays on top forever, no matter how many chips you manufacture.
Why this isn’t 1999 (and why it also sort of is)
On one hand, today’s balance sheets are fortress-level. These aren’t garage startups hoping to IPO before payroll is due. These are global giants with real cash flow and massive user bases.
On the other hand, valuations don’t care about résumés. They care about demand. And right now, a meaningful slice of that demand looks like the tech-sector equivalent of two poker players raising each other with borrowed chips.
I’m not predicting a crash. I’m predicting common sense: a cooling period, a recalibration, a moment when investors collectively admit that revenue generated from your neighbor buying your GPUs using money you gave them is… not exactly the same as organic growth.
If the economy slows or the Fed decides to stay tighter for longer, that recalibration may arrive faster than the Dallas Cowboys giving up a fourth-quarter lead. (Some things in life are beautifully consistent.)
The bottom line
Here’s the advice I give every Thanksgiving season and will continue giving until someone tapes my mouth shut: stay disciplined, know what you own, and don’t chase the shiny objects. If you’re in index funds, you already own more AI exposure than you probably intended. And if you want diversification, the rest of the world is still out there—cheaper, calmer, and a lot less dramatic.
AI is real. AI is transformative. But transformative technology isn’t the same thing as perfect timing. Circular money is a yellow flag, not a red one.
And as always: keep your head on straight, your risk balanced, and don’t get fooled by market magic tricks.
Bill Taylor is the CEO and Chief Market Strategist at Digital Wealth News, offering expert insights on markets and asset classes. A proud Horned Frog and Texas Christian University grad, he played college basketball while there. With a strong finance background and passion for digital innovation, Bill shares thought leadership on market trends and portfolio strategy for our audience.
