Commodification of Intelligence: Good, Bad, and Ugly Circular AI Deals
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Research<br>Commodification of Intelligence: Good, Bad, and Ugly Circular AI Deals
By Wojciech Gryc · July 28,<br>2026 · 7 min read
Every few months, and especially this week, the AI space gets criticized for circular financing and<br>customer relationships. OpenAI raises money from Microsoft, spending it on Microsoft servers; Nvidia<br>backstops CoreWeave debt, and CoreWeave buys Nvidia GPUs. “The bubble is about to<br>burst!” analysts scream.
Analysts point to dot-com deals with circular investments in 1999, arguing that this is all bound to<br>happen again[1][2]. They are wrong.
Circular deals are more interesting than “good” or “bad.” They show the AI<br>industry isn't just maturing, but modifying the idea of “AI” to something that is<br>less a technology product, and more a commodity. Imagine that—intelligence available like electricity,<br>and the underlying financial system structured accordingly.
The evolution of circular deals points to the commodification of AI, where<br>compute capacity is moving from a business model where you buy a product (e.g., the hardware, or<br>space in a data center) to something so fungible that you buy it the way you buy electricity,<br>copper, natural gas, or other commodities.
We'll explore why circular deals are particularly important in commodity industries and<br>what this implies for understanding the trajectory of AI. First we'll cover how major investments in traditional commodities<br>markets work to ground our analogy more clearly. Next, we'll cover the investments that<br>mimic this process in AI, showing how such investments can be healthy. Finally, we'll<br>explore a few examples where circular deals do not abide by this analogy and how these<br>deals are introducing risks that could one day turn into awful surprises for the companies<br>themselves, their investors, or the entire sector.
Buying and Selling Commodities: A Circularity Primer
Complex commodity infrastructure like mines, refineries, and ports comes with such large<br>development costs that a bank lending a development company money can potentially risk its own solvency in<br>doing so. Circular deals with multiple customers or beneficiaries, and potentially even<br>governments, are often the only solution that gets shovels in dirt or ships in the water.
Let's look at a simplified example of such a deal. Imagine you want to develop your<br>region's economy with several wells and a pipeline, and you can't afford it. You partner<br>with a commodity trading firm who agrees to make your company attractive to banks or bond buyers by<br>guaranteeing they will buy all your oil at a certain price. This means you are guaranteed revenue<br>for the foreseeable future, and the banks know they can trust you'll repay their loans. The<br>trading firm might even take an equity stake in your company for good measure—potentially to<br>encourage better governance or oversight.
With such a relationship between you and the oil trader, you've got oil, a large bank loan, and a guaranteed<br>customer… you've got yourself a circular commodities deal!
This is not a contrived example; it's a common strategy developed and evolved since the<br>1960s. Japanese commodities traders and development banks financed infrastructure to enable<br>commodity development, committing to future purchases and equity deals[3]. Jamaica did so in the 1980s[4].
More recently, the US government began facilitating circular deal making to stimulate the critical<br>minerals sector in its bid for supply chain resilience. Last year, MP Materials, a relative<br>newcomer to magnet manufacturing and critical minerals, announced a 10-year relationship with the<br>Department of War, where the latter committed to buying all neodymium-praseodymium (i.e., magnets)<br>from the company for at least $110/kg[5]. Since then,<br>such off-take agreements have been announced between MP Materials and General Motors[6], and are in fact quite common in the electric vehicle<br>space[7]. These direct relationships also<br>incentivize equity ownership in the commodities producers and even underlying mines because<br>it's very clear that these producers and mines will have revenue in the coming years.
Fungible commodities with large global markets are particularly well suited to such<br>deals because the counterparty guaranteeing to be a customer (i.e., the oil trading firm in our example above)<br>knows there is a large market they can tap into. They likely have a history of successfully making<br>such sales, otherwise they wouldn't have billions of dollars and a pristine reputation<br>they can leverage.
AI is Fungible and Expensive to Develop
The frontier generative AI industry—be it model development or inference—is very much<br>dependent on Nvidia. GPUs are effectively a fungible commodity thanks to Nvidia's<br>development of the underlying infrastructure and standardization across all firms in the space....