WSJ Tech News Briefing
Episode: What’s the Deal With Circular AI Deals?
Date: October 28, 2025
Host: Bell Lin
Guests: Katie Bindley (WSJ Tech Reporter), Jonathan Weil (WSJ Heard on the Street Columnist)
Episode Overview
This episode explores two interwoven themes:
- San Francisco’s resurgence following the pandemic downturn—focusing on the city’s economic and social recovery, fueled in part by the AI boom.
- The rise of “circular deals” in the AI industry—unpacking how major tech companies (OpenAI, Nvidia, Microsoft, AMD, Oracle, etc.) are entangled in mutual mega-investments and product purchases, and assessing the risks and stakes of this trend.
San Francisco’s Rebound: From ‘Doom Loop’ Fears to AI-Driven Recovery
The Pandemic Years and the ‘Doom Loop’ (01:38)
- Katie Bindley recounts how the pandemic emptied San Francisco:
- Remote work decimated “the high concentration of knowledge workers” in the city.
- Commercial real estate and rents declined sharply, crime and visible homelessness increased.
- “We technically weren’t in a doom loop... but people had concerns the city was in a pretty bad place.” (Katie Bindley, 01:38)
Signs of Recovery (02:39)
- Return to work: More workers are back in offices multiple days a week.
- AI effect: “You have more people wanting to be here as a result of a lot of the AI companies.” (Katie Bindley, 02:41)
- City initiatives: Starting in 2023, policies addressed empty storefronts and eased business permitting.
- Example: A coffee shop founder succeeded with a lease-sharing agreement despite naysayers. “So far feels like it’s been a fantastic decision.” (Katie Bindley, 03:23)
Progress on Crime and Homelessness (04:00)
- Crime rates, especially burglaries, are down 28% in 2025.
- Visible homelessness has decreased due to tent encampment removals.
- “Some residents have definitely noticed improvements on both.” (Katie Bindley, 04:10)
Ongoing Challenges (04:21)
- Shortage of affordable housing and persistent issues with the drug crisis remain high on the mayor’s list.
- “He pointed in particular to affordable housing shortage... and the issues tied to the drug crisis.” (Katie Bindley, 04:27)
Circular AI Deals: Hype, Risk, and Historical Echoes
What is a Circular Deal? (05:48)
- Definition: Company A pays Company B; Company B then buys from Company A—often relying directly or indirectly on funds provided by the initial investment.
- “Without that initial transaction, company B might not be able to make the purchase.” (Bell Lin, 05:51)
- Current context: This dynamic is widespread among AI giants.
Examples in AI (06:32)
- Nvidia & OpenAI:
- OpenAI announced a deal to buy millions of Nvidia chips.
- Nvidia promises to invest $100 billion in OpenAI—possibly enabling OpenAI’s purchases.
- “Is that a quid pro quo? Maybe, maybe not... If the $100 billion from Nvidia doesn’t come through, then maybe whatever OpenAI’s hoping to buy from Oracle, it may be less.” (Jonathan Weil, 06:40 & 07:17)
- Downstream ripple: OpenAI’s future deals—like potentially spending $300 billion with Oracle—may hinge on proceeds from such investments.
Dot-Com Bubble Comparisons (07:54)
- Historical parallel: The dot-com era’s telecom infrastructure build-out relied on similar circular financing—vendors lent money so buyers (customers) could purchase their products.
- Lucent and Windstar are cited as cautionary examples: “Lucent lent as much money as Windstar needed for a long time for Windstar to be able to buy Lucent’s stuff.” (Jonathan Weil, 08:27)
- When demand collapsed, both companies suffered heavily.
- New twist: AMD is offering OpenAI warrants for up to 10% ownership to secure chip sales—a highly unconventional move for an established public firm.
Best-Case and Worst-Case Scenarios
Best-Case: Massive AI Demand Materializes (09:35)
- For tens or hundreds of billions of investment to be sustainable, similarly massive customer demand must emerge—beyond just “average retail people paying $20 a month.”
- “If you’re talking about trillions of dollars of infrastructure..., the best case scenario is you need like trillions of dollars of cash flow.” (Jonathan Weil, 09:44)
- Skepticism prevails over whether this is realistic: “That’s where the biggest source of skepticism is.” (Jonathan Weil, 10:25)
Worst-Case: Pullback Triggers a Cascade (10:38)
- If one or several major investors decide the returns aren’t coming and cut back spending, others may follow, rapidly deflating the AI ecosystem.
- “That would be a scenario with a lot of ripple effects.” (Jonathan Weil, 11:06)
Notable Quotes & Memorable Moments
-
“We technically weren’t in a doom loop... but people had concerns the city was in a pretty bad place.”
— Katie Bindley, (01:50) -
“Is that a quid pro quo? Maybe, maybe not.”
— Jonathan Weil, (06:40) -
“The notion that you would have an established large, mature publicly traded company giving away 10% of itself in the form of warrants, that’s a new twist.”
— Jonathan Weil, (09:21) -
“That’s where the numbers are kind of blowing people’s minds... it’s hard to get your head around the notion that there’s going to be those types of future cash flows.”
— Jonathan Weil, (10:17)
Key Timestamps
- San Francisco’s past reputation: 01:38
- Factors driving city’s recovery: 02:39
- Crime and homelessness update: 04:00
- Lingering city challenges: 04:21
- Explanation of circular deals: 05:48
- AI mega-deals and examples: 06:32
- Dot-com parallels and AMD’s “new twist”: 07:54–09:21
- Best-case and worst-case scenarios: 09:35–11:06
Tone & Language
The episode uses clear, accessible language, balancing skepticism with optimism. Both Katie Bindley and Jonathan Weil offer context and analogies that help listeners understand why the AI industry’s current deal-making matters, and how it could shape the market—and cities like San Francisco—in the years to come.
For listeners interested in the intersection of tech investment, urban economics, and market risk, this episode distills a complex, fast-changing landscape into clear takeaways about today’s AI ecosystem and its echo with tech’s past booms and busts.