AI Trade Dangerously Financing Itself, China Just Found the Exit: CEO
Investors chasing the AI trade need to look past the trillion-dollar figures and ask a much harder question, warns the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green of deVere Group’s comments come as a global sell-off in semiconductor stocks deepened on Tuesday, with investors growing increasingly uneasy about whether the AI boom can sustain itself.
South Korea’s Kospi index dropped as much as 8.1%, its lowest level since April 20, as memory giants Samsung Electronics and SK Hynix each slumped more than 9%.
Japan’s chip-heavy Nikkei 225 fell 4%. New mapping of the AI industry’s biggest players shows chipmakers, cloud giants, and AI labs increasingly investing in one another and buying from one another in the same closed loop, while Chinese rivals close the technology gap at a fraction of the cost.
“Today’s rout in Seoul and Tokyo is no random wobble. The market is finally pricing the circularity risk it has been ignoring for months,” notes the CEO of deVere.
“When Samsung and SK Hynix can lose close to a tenth of their value in a single session, that tells you how fragile the confidence underpinning this entire sector has become.”
He continues: “Nvidia funds OpenAI. OpenAI pays Oracle and Microsoft for cloud capacity. Oracle and Microsoft turn around and buy Nvidia chips with the proceeds.
“The same dollar gets counted as revenue three times on its way around the loop. This is not demand. It’s an accounting trick wearing a growth story as a costume.
“Nvidia is valued at $4.5 trillion and has committed up to $100 billion to a company, OpenAI, that is on track to lose roughly $14 billion this year,” says Nigel Green.
“Would any bank underwrite that loan on those terms? Of course not. But dress it up as an AI investment and Wall Street applauds.
“Oracle is sitting on a backlog north of $500 billion, built heavily on commitments from a customer that has already admitted, in public, it may not be able to pay for the computing power it has ordered,” says Nigel Green.
“This isn’t a rounding error. It’s the fault line running under the entire AI infrastructure trade.”
Nigel Green says the bigger danger for Western portfolios is not inside the loop; it is outside it.
“While Silicon Valley recycles the same capital between five companies, Chinese labs are shipping frontier open-source models trained on domestic chips, at a fraction of the cost, and developers are already voting with their traffic,” explains the deVere CEO.
“China is not playing catch-up anymore. In several places, it’s setting the price and the pace, and Silicon Valley is reacting to it.”
“China is going to win parts of this race. Say it plainly, because pretending otherwise does investors no favours,” says Nigel Green.
“Every major technology shift in history has produced winners, losers, and brutal new competitors. Electricity did it, the internet did it, and AI will be no different.”
Nigel Green stresses: “None of this means investors should run from AI.
“It means they should stop investing in the story and start investing in the balance sheet.
“The companies that win will be the ones with real customers paying real money, margins that don’t depend on their own supplier lending them the cash to buy the product, and tech that still works if the financing dries up.”
“Periods exactly like this one, loud, leveraged, circular, are what separate durable companies from fragile ones.
“History rewards the investors who spot the difference early and punishes the ones who mistake the noise for the signal,” says Nigel Green.
He concludes: “The test for any AI holding right now is simple: run three checks. Where does the revenue actually originate?
“Would the customer still be a customer if the supplier stopped funding them?
“And how much of that company’s edge survives a Chinese competitor delivering 80% of the performance at a fraction of the cost?
“The reward goes to the investors doing the work now, not to the ones still cheering the circularity as though it were growth.” #AI Trade Dangerously Financing Itself, China Just Found the Exit: CEO# Global Markets Mixed with AI Stocks Dragging Trades, Indices
