Picture a car dealer who lends you the money for the car. Fine so far. Now the dealer also promises your bank it'll buy the car back if you stop paying. And it keeps building more cars for buyers just like you. That's how James Mackintosh describes AI finance in Monday's Streetwise column, Nov. 2. He finds it worrying. So do we.
Here's the fact that set him off. Last week Nvidia (NVDA), AMD (AMD) and Broadcom (AVGO) agreed to put $5 billion into Meta's (META) $25 billion stock sale as cornerstone investors. Meta is one of their biggest customers. It's raising money partly to buy their chips. Mackintosh calls that "as circular as it gets." Meta had no trouble finding buyers. Demand was strong enough that it made the offer bigger. So the chip makers didn't have to chip in. His troubling answer for why they did is pay-to-play. Meta is so big a customer that its chip makers may feel they have to.
The textbook says a cash-rich company should hand the extra back to its owners. They can decide which AI giants to back. Instead, the chip makers are doubling down on AI. Every AI headline now hits them twice, as chip sellers and as Meta shareholders. By Friday, Oct. 30, when AI stocks fell, all three had lost what they'd gained earlier in the week.
One bet wearing four tickers
The $5 billion is small change in AI finance. The bigger web is on the debt side. Take CoreWeave (CRWV). Its shares are down 23% this year, and Nvidia is its second-biggest shareholder. CoreWeave buys huge numbers of Nvidia chips. Nvidia, in turn, has promised to rent whatever computing power CoreWeave can't sell, through 2032. Bond investors already price CoreWeave as distressed. In June its 2031 bonds paid just over 4 percentage points more than Treasurys. Now the gap is more than 10 points. Then there's Ohio. SoftBank's SB Energy is building a giant data center there for OpenAI, and Nvidia stands behind it with a $105 billion backstop. If demand for computing power sags, the same thing hurts the borrower, the guarantor and the chip maker at once.
Our read
This is an Investments/Risk · IN04 story. The lesson is correlation, which is a fancy word for things that move together. Mackintosh ends on the point that matters for us. When companies finance each other, their shares tend to rise and fall together. The market is less spread out than it looks. We hold Nvidia at weight in 31 model books, Meta in 20, Micron in 23, Marvell in 20 and CoreWeave in one satellite sleeve at 16%. Nothing added, nothing trimmed. We already count those as one AI corner, and this column is why. A supplier that is also your investor, or a customer that is also your lender, is a tie. Ties tighten in a downturn.
Here's the check for your own plan. Open your 401(k) or brokerage statement this week and pull every chip, cloud and AI name onto one line. Nvidia, AMD, Broadcom, Micron, the data-center landlords, and the slice of your S&P 500 fund that holds all of them. Add them up as one position. If that single line is bigger than you'd ever put in one stock, you've found your real concentration. Diversification only counts if the pieces can fail separately. If the total surprises you, bring the statement to your next review. You check the roof in the dry season, while a leak is still cheap to fix.