AMD *JUST* Accidentally EXPOSED the Ponzi.

The video discusses concerns about a potential AI bubble and circular financing schemes in the tech industry, drawing parallels to the market crash of 1929. It highlights recent significant deals, such as the one between AMD and OpenAI, and questions their sustainability. The speaker outlines a complex financial arrangement involving Nvidia, OpenAI, and AMD, where investments flow in a loop, potentially inflating stock prices and creating a bubble.

This circular structure involves Nvidia investing in OpenAI, which then uses that capital to purchase AMD GPUs. OpenAI's potential ownership in AMD and Nvidia's ownership in OpenAI create a feedback loop where the success of one company directly benefits another, driving up stock valuations. The speaker contrasts AMD's and Nvidia's financial health, noting Nvidia's significantly higher gross and net margins, suggesting AMD might be leveraging these deals for branding and future business rather than immediate financial strength.

The video also touches upon the cyclical nature of market booms and busts, moving from fear to FOMO and then to debt-fueled euphoria. It points to increasing corporate debt and stock price targets being tied to deal vesting as indicators of an unsustainable market. Despite current valuations not being as high as the dot-com bubble, the speaker raises concerns about a potential 40% miss in expected AI revenue by 2030, hinting at a possible downturn reminiscent of 1929.

• Concerns about a potential AI bubble and circular financing in tech deals are being raised, with comparisons to the 1929 market crash.
• A complex deal structure involving Nvidia, OpenAI, and AMD creates a circular flow of investment and revenue, potentially inflating stock prices.
• Nvidia commits $10 billion for every gigawatt deployed by OpenAI, with the first deployment expected in the second half of 2026.
• AMD is entering a partnership with OpenAI, involving the deployment of 6 gigawatts of AMD GPUs, with the first gigawatt set to begin in the second half of 2026.
• The financial health of AMD is contrasted with Nvidia, with Nvidia showing significantly higher gross and net margins, suggesting AMD's deal may be for branding and future market access.

Related Video Summary

• OpenAI is the world's most valuable private company: How it became a $500B behemoth
• Trump fails to reach a deal to avert a shutdown, gold and silver power to fresh highs
• Nvidia Investing $100 Billion in OpenAI
• 3 Passive Income Assets The Rich Are Buying Right Now (While You’re Working)

The AI Bubble and Historical Parallels [0:00]

• A major deal between AMD and OpenAI is drawing comparisons to a market bubble and circular financing, reminiscent of pre-Great Depression market conditions.
• The Dow Jones fell 17% in 1929, marking the beginning of a prolonged market decline, and by 1932, it was down 80% from its peak.
• Current market performance, with the S&P 500 up 73% since 2023 over two years, is presented as less extreme than the pre-1929 boom.
• An 80% decline from the current S&P 500 price of $6,741 would bring it down to $1,348.
• The post-1929 era saw bank failures and protectionist tariffs, along with belief in new technologies like electrification, radio, and cars, some of which ultimately failed (e.g., RCA).
• Concerns of fraud and insider trading were present in 1929, with "painting the tape" and questionable options activity noted in historical accounts.

"See, in 1929, the Dow Jones fell 17% as we started entering the Great Depression."

The speaker draws a stark parallel between current market events and the period leading up to the 1929 stock market crash, emphasizing the scale of the historical decline and its impact. This sets a cautionary tone, suggesting that present market dynamics might harbor similar risks.

Circular Financing in AI Deals [0:40]

• Unusual options activity for AMD was noted on October 2nd, with over $6 million in long-dated call options purchased, suggesting insider knowledge of a significant deal.
• A user on X speculated that AMD had just signed a multi-billion dollar deal to support GPUs for OpenAI.
• Four days later, OpenAI and AMD announced a partnership expected to generate tens of billions of dollars in new revenue.
• This situation is described as "grifting" and highlights a potentially circular nature of these investments and the associated risks.

"The Kabesi letter says here on October 2nd users on X began noting unusual options activity in AMD."

This section details the specific events leading to the announcement of the AMD and OpenAI deal, focusing on the suspicious timing of options activity and the subsequent public confirmation, hinting at potential insider information and a predetermined outcome.

The Nvidia-OpenAI-AMD Deal Structure [3:33]

• Nvidia has committed to investing $10 billion into OpenAI for every gigawatt deployed.
• This investment is triggered by the deployment of the first gigawatt, with subsequent gigawatts also receiving $10 billion investments, potentially totaling $100 billion.
• The first gigawatt deployment of Nvidia systems is expected in the second half of 2026, on Nvidia's Vera Rubin platform.
• Upon deployment of the first gigawatt, OpenAI receives $10 billion.
• OpenAI is then planning to invest with AMD for a new deployment of at least 1 gigawatt of energy, starting in the second half of 2026.
• The strategic partnership between AMD and OpenAI involves deploying 6 gigawatts of AMD GPUs.
• The first gigawatt deployment of AMD is set to begin in the second half of 2026.

"Nvidia will invest $10 billion once the first gigawatt is deployed. And then every next gigawatt they'll do another $10 billion dollars for a total of hundred billion dollars."

This segment breaks down the intricate financial commitment between Nvidia and OpenAI, outlining the staggered investment plan tied to energy deployment milestones, and how this capital then flows into the AMD partnership.

The Circularity Explained [5:38]

• AMD is not initially in the picture; it's Nvidia and OpenAI. Nvidia offers $10 billion to OpenAI contingent on deploying a gigawatt, expected in late 2026.
• OpenAI then approaches AMD to start construction on a "gigawatt factory" in late 2026, following the inflow of $10 billion from Nvidia.
• The AMD deal is structured to begin in the second half of 2026, mirroring the Nvidia deal's timeline, suggesting the AMD deal is contingent on the Nvidia deal's progress.
• Money from Nvidia goes to OpenAI, which can then be allocated to AMD.
• AMD generates revenue by selling chips to OpenAI.
• Nvidia also benefits as its data centers are completed with OpenAI, with both deals progressing concurrently.
• The circularity intensifies as more money Nvidia receives allows for further investment in OpenAI (second, third, etc., gigawatts).
• When AMD receives money, its stock price is expected to increase.
• OpenAI will have ownership in AMD, and if AMD's stock rises, Nvidia, which owns part of OpenAI, directly benefits.
• This increased benefit for Nvidia allows for more deals, potentially leading back to AMD for subsequent gigawatt deployments, creating a continuous cycle.
• The AMD commitment and deal are reportedly based on Nvidia hitting certain stock price tranches.

"You see the circle building so far? And I'm not making this stuff up."

The speaker emphasizes the self-reinforcing nature of the financial arrangements, illustrating how investments and partnerships create a loop that benefits all parties involved, driving up stock prices and further fueling the cycle.

AMD vs. Nvidia: Financial Strength and Motivation [8:44]

• AMD's "Power Purchase Agreement" (PPA) is not as substantial as Nvidia's.
• Nvidia has a significantly larger "Price-to-Book" (P/B) ratio compared to AMD.
• AMD's gross margin is 39.8%, while Nvidia's is 72%, indicating Nvidia's greater pricing power.
• AMD's net income margin is 11.3%, which is still less than a fifth of Nvidia's net income.
• Nvidia's superior pricing power and margins are evident in its financial performance.
• AMD is giving up 10% of its company in the deal, not due to financial necessity but for branding purposes.
• The deal allows AMD to market itself as a partner of OpenAI, potentially attracting more business from other AI companies like Anthropic or Microsoft.
• This branding strategy is supported by comments from AMD's CEO, who stated that data centers would be needed in "diversified locations to be determined," suggesting a lack of concrete plans.
• AMD's plans appear contingent on Nvidia's buildout, as OpenAI relies on the investment from Nvidia to fund these ventures.

"Nvidia smokes AMD's pricing power because the margins are insane. The numbers don't lie."

This section provides a financial analysis comparing AMD and Nvidia, highlighting Nvidia's dominant position and suggesting AMD's strategic decision to cede ownership is primarily for marketing and future growth rather than immediate financial need.

OpenAI's Financial Position and Cycle Stage [11:17]

• Once Nvidia's buildout occurs, OpenAI will receive $10 billion in cash.
• OpenAI currently has limited cash reserves, with projected revenues of about $12.7 billion this year.
• OpenAI is expected to be a money loser until approximately 2030, with anticipated expenses exceeding $100 billion for AI training and buildouts.
• These financial expectations are reported by "The Information."
• The current stage of the market cycle is described as a "giant circle."
• The cycle: Nvidia invests in OpenAI -> OpenAI builds factories to buy Nvidia chips -> Nvidia reinvests more into OpenAI -> OpenAI signs deals with AMD, giving AMD shares based on stock performance -> AMD's stock price rise increases OpenAI's valuation -> this boosts Nvidia's valuation -> enabling Nvidia to do more deals.
• Market cycles typically progress from fear to cash buying, then FOMO buying, and subsequently "FOMO meets debt."
• Corporate debt is a significant factor fueling the current cycle, with examples like Meta securing $26 billion in financing and Oracle being heavily leveraged.
• Amazon is noted for using less debt compared to other companies.
• The current situation is described as "FOMO meets debt," which is a way to keep fueling the cycle.

"It's a giant circle. So, what's what's the stage of the cycle?"

The speaker details OpenAI's precarious financial state and then outlines the progression of market cycles, emphasizing the role of debt in sustaining current market conditions, which appears to be a critical phase before potential euphoria.

Euphoria and Stock Price Contingencies [13:50]

• After the "debt" phase, euphoria typically follows, leading to a new "special phase of the cycle."
• In this special phase, stock prices become pegged to more euphoria.
• The vesting of AMD ownership is tied to AMD achieving certain share price targets and OpenAI meeting technical and commercial milestones for AMD deployments.
• The AMD deal is contingent on AMD's stock price tripling to $600 at the highest tranche, similar to stock-based compensation plans seen with Elon Musk or the Open Door plan.
• This phase of the cycle involves making money or deals contingent on stock prices reaching specific levels, leading to mania and a bubble.
• The video does not delve into what happens after the mania and bubble phase.
• Valuations today are not technically as high as during the dot-com bubble, suggesting there might still be room for growth.
• The S&P valuation is still below dot-com highs, but the Warren Buffett indicator is at its highest historical level (213-217% of GDP), indicating extreme overvaluation.
• The madness of these circular deals may be contributing to these high valuations.
• Large companies like Microsoft are likely to have "escape hatches" in their deals due to their size and negotiation power, allowing them to exit or renegotiate terms.
• Smaller companies, facing potential collapse if a bubble bursts, may prioritize cashing out and taking the upside.

"Vesting of AMD ownership is tied to AMD achieving certain share price targets and to open AI achieving the technical and commercial milestones required to enable AMD deployments at scale."

This section explores a critical stage in market cycles where stock prices are directly linked to specific targets and future performance, leading to potential mania and bubble conditions, with a comparison to historical overvaluation metrics.

AI Revenue Projections and Potential Downturn [17:00]

• Estimates suggest $2 trillion in artificial intelligence revenue will be needed to fully fund buildouts by 2030.
• However, projected revenues are only $1.2 trillion, indicating a potential 40% miss.
• A significant fear is that, similar to 1929, government bailouts, rate cuts to zero, and money printing may not be enough to stimulate employment if AI jobs are not yet created.
• This could lead to an environment of continued hiring freezes due to artificial intelligence.
• In the short term, prices can fluctuate wildly.
• The speaker predicted a potential top around 232 for AMD, with the stock peaking at approximately 228.
• Pre-market trading often reflects the highest pricing.

"And of course my big fear is that much like in 1929 where we started, you know, bailing out companies, it won't be enough."

The video concludes by addressing the significant gap between projected AI revenue and the funding required for buildouts, raising concerns about a potential economic downturn where traditional stimulus measures might prove insufficient, drawing another parallel to the aftermath of the 1929 crash.