Tech Brew Ride Home - The AI Concern Committee Is Back

Episode Date: October 8, 2025

More on the circular nature of the recent AI deals. AI now accounts for more debt issuance than US banks. AI companies consider using the billions they’ve raised to pay off lawsuits since they can��t get insurance. Another way OpenAI is the new Microsoft. And at the end? Look at that! A non-AI story! OpenAI, Nvidia Fuel $1 Trillion AI Market With Web of Circular Deals (Bloomberg) Nvidia’s Huang says he’s surprised AMD offered OpenAI 10% of company in ‘clever’ deal (CNBC) At $1.2 Trillion, More High-Grade Debt Now Tied to AI Than Banks (Bloomberg) Without data centers, GDP growth was 0.1% in the first half of 2025, Harvard economist says (Fortune) Insurers balk at multibillion-dollar claims faced by OpenAI and Anthropic (Financial Times) OpenAI Sneezes, and Software Firms Catch a Cold (Wired) Amazon Pharmacy introduces kiosks that can quickly dispense medications at the doctor’s office (GeekWire) Learn more about your ad choices. Visit megaphone.fm/adchoices

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GoogleFi Wireless is not subject to data traffic deprioritization during times of high network usage. Welcome to the Tech Brew Ride Home for Wednesday, October 8th, 2025. I'm Brian McCullough today. More on the circular nature of the recent AI deals. AI now accounts for more debt issuance than U.S. banks. AI companies consider using the billions they've raised to pay off lawsuits since they can't get insurance. Another way, Open AI is maybe the new Microsoft. And at the end, look at that. A non-AI story.

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If earlier this week was all about the AI horse race, today is a lot about the concern, about the AI horse race rearing its head again. For example, let's start with Bloomberg, quote, never before has so much money been spent so rapidly on a technology that for all its potential remains largely unproven as an avenue for profit making. And often these investments can be traced back to two leading firms, Nvidia and OpenAI. The recent wave of deals and partnerships involving these two are escalating concerns that an increasingly complex and interconnected web of business transactions is artificially propping up the trillion-dollar AI boom. At stake is virtually every corner of the economy with the hype and build-out

of AI infrastructure rippling across markets from debt and equity to real estate and energy. If we get to a point a year from now where we had an AI bubble and it popped, this deal might be one of the early breadcrumbs. Brian Colello, an analyst with Morningstar said about Nvidia's investment in Open AI, quote, if things go bad, circular relationships might be at play, end quote. Some analysts and academics who've tracked the tech industry long enough, see uncomfortable similarities to the dot-com bubble. In the late 1990s, circular deals were often centered on advertising and cross-selling between startups where companies bought each other's services to inflate perceived growth, said Paulo Carveo, a senior fellow at the Harvard Kennedy School who researches AI policy,

and who worked in tech in the late 1990s. Today's AI firms have tangible products and customers, but their spending is still outpacing monetization, end quote. Meanwhile, Bloomberg also has sources saying Nvidia is about to do another deal that is, shall we say, spherical in nature. XAI is reportedly near a deal to raise $20 billion in equity and debt tied to the Nvidia GPUs that XAI plans to rent for its Colossus 2 project. Quote, the financing includes equity and debt in a special purpose vehicle

that will buy Nvidia processors and rent them to XAI for use in its Colossus 2 project, said the people who asked not to be identified because the information is private. That's the name of its largest data center site, which is located in Memphis. Nvidia is investing as much as $2 billion in the equity portion of the asset-backed transaction, the people said, a strategy by the chipmaker that helps accelerate its customers' AI investments. XAI's fundraising effort, previously reported by Bloomberg, at half the amount, may continue to grow. In an interview with CNBC Wednesday, NVIDIA's CEO Jensen Wong said when asked about Bloomberg's reporting that the only regret he has about XAI and Elon Musk is that he, quote, didn't give him more money.

Almost everything that Elon's part of, you really want to be part of as well, Wong said. He gave us the opportunity to invest in XAI, and I'm just delighted by that, end quote. In that same interview, Jensen had things to say about that recent OpenAI and AMD deal. quote, it's imaginative, it's unique and surprising, considering they were so excited about their next generation product, Huang said in an interview with CNBC's Squawk Box, I'm surprised that they would give away 10% of the company before they even built it. And so anyhow, it's clever, I guess. Huang said, Nvidia's investment in OpenAI is very different from OpenAI's deal with AMD in that it allows Nvidia to sell directly to the chat GPT creator.

NVIDIA's investment in OpenAI has underscored concerns about the, quote, circular nature of some AI infrastructure deals. Asked how Open AI will fund the deal with NVIDIA, Wong said they don't have the money yet. They're going to have to raise that money through, first of all, their revenues, which is growing exponentially, equity or debt, Wong said. They gave us the opportunity to invest alongside other investors when the time comes. Wong added that after NVIDIA previously invested in Open AI, his quote, only regret is that we didn't invest more, end quote. so the talking points seem to be on point. And more concerned trolling, but on the macro level again, according to J.P. Morgan Chase,

debt tied to AI-related companies has now hit $1.2 trillion, making it the largest segment of the investment-grade debt market at 14%, thereby surpassing U.S. banks, which stand at 11.7%. I'm going to say that again, debt related to AI projects and companies is more than U.S. banks have taken out to fund their operations. Quoting Bloomberg, debt tied to AI companies is growing fast, but it trades tight for good reasons, wrote the analyst. They noted that most of these companies are high-quality issuers, either cash-rich or not highly levered, and are likely highly regulated, which justifies their outperformance. Debt investors are also scrambling to get a piece of

the pie. Oracle's $18 billion bond sale last month, the second largest high-grade deal this year, garnered nearly $88 billion in investor demand. Banks and private credit firms have also been competing to underwrite debt deals supporting the development of large data centers. The turret assent of AI stocks has caused some angst for credit investors worried that any potential downside there could be have credit implications, wrote the analysts. From a fundamental perspective, those fears are not justified, end quote. So that's not exactly a concern, troll, but you get my point. One more. Harvard economist Jason Furman estimates that investments in data centers and information processing software accounted for 92% of U.S. GDP growth in the first half of 2025. Quoting fortune,

excluding these technology-related categories, Furman calculated in a September 27th post on X.com, GDP growth would have been just 0.1% on an annualized basis, a near standstill that underlines the increasingly pivotal role of high-tech infrastructure in shaping macroeconomic outcomes. Furman's findings shared online and echoed by financial analysts, including Robert Armstrong of the Financial Times' unhedged, the same writer who coined the term Taco Trade, echo several months of observations on the remarkable surge in data center infrastructure. In August, Renaissance macro research estimated to date in 2025, the dollar value contributed to GDP growth by AI Data Center buildout had surpassed U.S. consumer spending for the

first time ever. That's remarkable, considering consumer spending is two-thirds of GDP. Technically, as Furman notes, investment in information processing equipment and software was only 4% of U.S. GDP for the first half of 2025, yet it also accounted for fully 92% of GDP growth over that period. Furman added, it's probably not the case the U.S. economy would have recorded almost no expansion at all, absent this buildout, reasoning that, quote, absent the AI boom, we would probably have lower interest rates and electricity. prices, thus some additional growth in other sectors. In very rough terms, that could maybe make up for about half of what we got from the AI boom. But still, it's big. This surge in technology-led

growth comes against a backdrop of wider economic sluggishness and paradoxically strong GDP growth. Job creation has slowed raising concerns that absent technology investment, the U.S. economy could have slipped into recession. Other sectors from manufacturing and real estate to retail and services contributed little or even detracted from overall output in the first half of 2025. And yet, as Apollo Global Management Chief Economist Torsten Slocke has noted, the GDP figures speak of a statistically strong economy. The consensus has been wrong since January, Sloke said in a note circulated to clients in early October, adding the average of economist forecast has said the U.S. economy would slow down for nine months consecutively. Quote, but the reality is that it has

simply not happened. We in the economics profession need to look ourselves in the mirror, end quote. Furman's analysis adds to the snarky and accurate observation by Rusty Foster of Today in Tabs, who quipped, Our economy might just be three data centers in a trench coat, an allusion to the data center buildout boom and to the cartoon trope slash sight gag of several young boys teaming up to disguise themselves as an adult. Morgan Stanley chief economist Michael Gapen ventured a guest on October 6 about the mystery of the 2025 economy, quote, between solid spending data and weak hiring, he argued that it, quote, can be explained by a corporate sector that absorbed the initial cost of tariffs and reduced unit labor costs and profitability rather than raising prices. In other words, something that has

nothing to do with the data center buildout that is widely fueling bubble fears, even among Amazon founder Jeff Bezos himself, who insists these data centers are an industrial bubble rather than a financial one. And we will all be glad someday to have such incredible computing power at our fingertips with so many hundreds of billions spent. The question of sustainable GDP growth is a separate one, end quote. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds.

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But of course, data centers and chips aren't all AI startups have to spend money on, quoting the FT. OpenAI and Anthropic are considering using investor funds to settle potential claims from multi-billion-dollar lawsuits as insurers bulk at providing comprehensive coverage for the risks associated with artificial intelligence. The two U.S.-based AI startups have traditional business insurance coverage in place, but insurance professionals said AI model providers will struggle to secure protection for the full scale of damages they may need to pay out in future. OpenAI, which has tapped the world's second largest insurance broker Aon for help, has secured cover of up to $300 million

for emerging AI risks, according to people familiar with the company's policy. Another person familiar with the policy disputed that figure, saying it was much lower. But all agreed the amount fell far short of the coverage to insure against potential losses from a series of multi-billion dollar legal claims. Aon declined to comment on individual companies, but Kevin Kalanick, head of cyber risk at Aon, said of the insurance sector broadly, quote, We don't yet have enough capacity for model providers. He added of insurers what they can't afford to pay is if an AI provider makes a mistake that ends up as a systemic correlated, aggregated risk, end quote. The industry's reticence to provide comprehensive cover for AI companies

comes from the unprecedented scale of potential claims faced by relatively young tech companies. The risk is heightened as enormous damages known as nuclear verdicts against big U.S. companies have also become more common. Two people with knowledge of the matter said OpenAI has considered self-insurance or putting aside investor funding in order to expand its coverage. The company has raised nearly $60 billion to date with a substantial amount of the funding contingent on a proposed corporate restructuring. One of those people said OpenAI had discussed setting up a captive, a ring-fenced insurance vehicle, often used by large companies to manage emerging risks. Big tech companies such as Microsoft meta and Google have

used captives to cover internet-era liabilities such as cyber or social media, end quote. And in the old days, we'd talk about, you know, when Apple would be release a feature for the iPhone or maybe way back when Microsoft would release a new product, we'd be like, well, they just nuked so-and-so startup. Well, guess who wields that sort of fear in the tech industry now? Quoting Wired, Alan Thigson, the CEO of DocuSign, was not particularly concerned when he saw the news last week that OpenAI had created an internal tool called DocuGPT. He might have preferred that OpenAI choose a different name for its contracting tool, but still he thought DocuGPT barely scratched the surface of what DocuSign can do.

This is a fairly obvious demo, and it's well known that these things are possible, and it's not really material to our story or competitive position. He recalls thinking when he saw the announcement, DocuSign's investors, however, did not appear to agree. The company's stock dropped 12% following the news. It wasn't the only software firm to take a hit. In addition to DocuGPT, OpenAI detailed a number of other custom AI programs the company uses, including an AI sales assistant, a customer feedback bot, and an AI support agent.

HubSpot shares fell 50 points following the news, while Salesforce saw a smaller decline. The episode underscores OpenAI's power in the current market. The company was showcasing fairly basic internal tools built on its public API, but its blog post was interpreted by some as a declaration of war against enterprise software providers. For leaders like Thigson, the episode suggests the challenge isn't just keep keeping up with advances in artificial intelligence, but also staying ahead of the narrative. This is a market where everything is driven by narratives right now, says Rishi Jaluria, an analyst at

RBC Capital Markets, who focuses on tech stocks. The fundamentals are kind of getting overlooked, end quote. Finally today, want something that isn't AI, or at least I don't think there's AI in this, Amazon is rolling out Amazon pharmacy kiosks to quickly dispense medications to patients after an appointment, initially rolling out in its one medical offices in L.A. But I bet you can imagine they want to put these in a lot of doctors' offices eventually, quoting Geekwire. The kiosk will initially be located inside offices for one medical, Amazon's primary health care company,

in locations across the greater Los Angeles area starting in December. Expansion to additional one medical offices and other locations is expected soon after. The goal of the freestanding kiosk is to facilitate easier filling of prescriptions, eliminating the need for an extra trip or waiting in line at a conventional pharmacy. According to Amazon, the kiosk will be stocked with a wide range of commonly prescribed medications, including antibiotics, inhalers, and blood pressure medications, controlled substances, and medications requiring refrigeration are not available. The inventory is tailored to the prescribing patterns of each office location.

After a provider writes a prescription, patients can choose to have it sent to Amazon pharmacy for in-office kiosk pickup. In the Amazon app, patients get a QR code to scan at the kiosk to pick up their medication, which is delivered within minutes with a custom label printed on the spot. The initiative is not without human intervention. Cameras inside the kiosk allow an Amazon pharmacist to get a live view and review medications before they are dispensed, and those pharmacists can also answer any patient questions via a video or phone consultation.

Giving customers a pickup point is a departure for Amazon pharmacy, which works via home delivery of medications. Hanna McClellan, Vice President of Operations for Amazon Pharmacy, told Geekwire that Amazon is prepared to scale the kiosk beyond the L.A. rollout. We do have many more kiosks, ready to go, McClellan said. I see One Medical as a launchpad for the kiosk, but I think they have runway far beyond one medical and frankly far beyond primary care offices. There's so many ways that they can drastically improve the pharmacy pickup experience today, end quote. The Seattle area has eight one medical locations, and McClellan said Amazon's home. hometown could be high on the list for where kiosks are placed, end quote.

Nothing more for you today. Talk to you tomorrow.