At the center of all of this is Open AI. They're doing what is known as circular deals. Let me break it down.

A company invests in Open AI, then Open AI immediately uses that exact money to buy products from the same company that just invested in them.

What we have to keep in mind throughout this entire video is Open AI is not profitable. They're hemorrhaging money, set to burn through $115 billion through 2029. So, how exactly are they signing these multi-billion dollar deals? That's where it gets insane.

Let's start with Microsoft.

They've pumped over $13 billion into Open AI. In return, Microsoft gets 20% of OpenAI's revenue.

But here's the accounting trick. Microsoft is booking OpenAI's revenue as their own cloud revenue. When Open AI pays Microsoft for cloud services with Microsoft's own investment money, Microsoft counts that as growth.

Imagine if I gave you $100, and you gave that same $100 back to me and we both say that we made $100. That's exactly what's happening here, except with hundreds of billions of dollars.

But the Microsoft deal isn't even the most concerning. OpenAI just signed a deal with Oracle to pay them $300 billion over the next 5 years.

Let me repeat that. A company that will lose $8.5 billion this year just agreed to a $300 billion deal. Even Sam Altman admits that OpenAI won't be profitable until 2029. But that's not stopping him from writing checks that he can't pay.