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AI companies can invest in one another while also buying or selling each other’s chips, computing capacity, cloud services, or infrastructure. These overlapping ties—sometimes called circular financing—can help firms secure scarce inputs, but they can also make it harder to tell how much demand is backed by independent customers and how much depends on linked counterparties. Financial authorities identify risks worth monitoring, not proof that a crisis is inevitable or that every connected deal is unsound.
What are circular AI deals?
A circular arrangement links companies through more than one financial or commercial relationship. For example, one company might invest in an AI firm, which then uses some of its funding to buy computing capacity or infrastructure from that investor or another company in the same network. The investor may therefore have exposure both to the AI firm’s financial health and to its ability to sell products or services to that firm.
The label is descriptive, not a verdict on a transaction. An investment and a supplier contract are distinct ties; together, they do not automatically establish that money has “gone around in a circle.” The relevant questions are how the relationships connect, where the funding ultimately comes from, and whether the target can support its spending with revenue from independent customers.
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How common are the connections?
In its 1 October 2026 analysis of AI-firm investment deals from 2021 through 2025, the Bank for International Settlements (BIS) reports that 28.7% of AI firms’ investment deals by deal value targeted another AI firm. It also reports that 55.2% of incoming investment in AI firms came from other AI firms. These statistics use the BIS dataset and definitions; they do not mean that all the deals were circular, involved supplier contracts, or were improper.
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Among AI-to-AI investment deals in that period, 16.1% by deal count also involved a commercial supply-chain relationship between investor and target. Measured instead by deal value, the share was 46.4%. The difference matters: a share of deals counts transactions equally, while a share of value gives larger transactions more weight. Neither figure means that those percentages of all AI investment were circular.
Why companies enter linked arrangements
AI infrastructure is expensive and can be difficult to secure quickly. An investment tied to a commercial relationship may help a company obtain critical computing capacity, chips, or other inputs while giving an infrastructure provider greater confidence that a customer will use its facilities. Coordination can also help firms plan capacity when demand is uncertain.
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BIS identifies the need to secure critical inputs and information asymmetries—situations where parties do not have the same information—as economic features behind these connections. A supplier may know more about its capacity or a customer’s likely needs than outside investors do; an investor may have information or influence that helps it assess a deal. But the same web of relationships can obscure who ultimately bears the risk. BIS Bulletin 137, by Jon Frost, Rudraksh Kansal, Kumar Rishabh, Vatsala Shreeti, and Leanne Si Ying Zhang, puts the tension this way: “Circular investment relationships reflect key economic features such as the need to secure critical inputs and the presence of information asymmetries, yet they entail macroeconomic risks and increase opacity.” The bulletin states that its views are those of its authors and do not necessarily reflect the BIS or its member central banks.
How the risks could spread
Demand or earnings fall short
If AI adoption, customer spending, or expected productivity gains disappoint, an AI firm may earn less than planned. It could then cut infrastructure spending or struggle to meet commitments. A supplier that depends on that customer may lose revenue, while an investor in the same firm may face a decline in the value of its stake. The resulting pressure can travel across counterparties rather than remaining within one company.
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BIS’s 28 July 2026 assessment says the economic payoff from AI remains uncertain and uneven across sectors and countries. That uncertainty does not establish that expected gains will fail to arrive; it means that investment plans and valuations depend on outcomes that are not yet assured.
Debt leaves fixed obligations after a slowdown
Building data centers and other AI infrastructure requires substantial up-front financing. The IMF’s April 2026 Global Financial Stability Report describes AI-related capital spending supported by bonds, leveraged loans, and intercorporate arrangements, which can sometimes form circular financing structures. The BIS’s 7 January 2026 bulletin says firms’ anticipated investment needs will shift financing away from operating cash flows toward debt, with private credit playing a rapidly increasing role.
Debt can transfer exposure from companies funding projects with cash toward banks, bondholders, private-credit funds, and other investors. If revenue growth weakens, scheduled interest and repayment obligations do not automatically shrink with it. Refinancing can become harder or more expensive, putting pressure on borrowers and potentially on the lenders and investors exposed to them. The IMF warns that cash buffers and earnings could prove insufficient against future spending, creating potential balance-sheet pressure; it presents this as a risk channel, not a forecast of failure.
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Investors may hold related exposure across a company’s shares, debt, private financing, and suppliers. If confidence in future AI earnings changes, those holdings can be repriced at the same time. The European Central Bank’s (ECB) May 2026 Financial Stability Review highlights concentrated positions across public and private equity and debt markets, alongside rising credit financing and the possibility of correlated repricing.
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The ECB also reports a historical association: 15% of years with particularly strong growth in both equity prices and business debt were followed by a financial crisis within two years. This is a historical statistic based on cited research and the ECB’s calculation, not an AI-specific forecast or a probability that an AI-linked deal will cause a crisis.
Complex ties can hide the real exposure
Equity stakes, loans, guarantees, purchase commitments, and commercial contracts create different kinds of exposure. If several are layered together, it can be difficult to map which company owes money, which one depends on a future purchase, and which investor bears a loss if a customer or supplier fails. An announced commitment is not necessarily the same as funded capital or a recognized liability; its terms, conditions, and timing matter.
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| Assessment | What it highlights | Important qualification |
|---|---|---|
| BIS, Bulletin 137, 1 October 2026 | AI-to-AI investment and commercial supply-chain links can secure inputs but also increase opacity and macroeconomic risk. | The reported deal shares use BIS definitions and do not establish misconduct or prove that every investment-and-supply link is circular. |
| BIS, Bulletin 120, 7 January 2026 | Investment needs may push firms toward debt and private credit; sustainability depends on high earnings expectations being met. | BIS assessed macrofinancial risks as moderate at that time. |
| IMF, Global Financial Stability Report, April 2026 | Debt and intercorporate financing can support AI capital expenditure, with multidirectional transmission and possible amplification through central firms in the investment network. | Insufficient future earnings or cash buffers are a potential balance-sheet pressure, not a statement that losses are certain. |
| ECB, Financial Stability Review, May 2026 | Rising credit financing, concentrated exposure, and correlated repricing are concerns to monitor. | At the review date, the ECB said US and euro-area business-debt growth remained low; it did not say AI debt had caused a crisis. |
Taken together, these assessments describe vulnerabilities and channels through which a shock could spread. They do not establish that the AI boom will trigger a financial crisis. The ECB’s debt-growth observation is specific to the United States and euro area at the review date, not a claim about every country or borrower.
How to assess a particular deal
Deal headlines often blur investment, financing, and commercial business into one story. To understand what a connection means, separate its components and ask:
- What kind of link is it? Identify whether the arrangement is an equity investment, loan, guarantee, purchase commitment, supplier contract, or a combination. These create different rights and obligations.
- Who is the investor also serving? Check whether the investor is also a supplier or customer, and how much of the target’s expected revenue depends on that relationship.
- Where does the money come from? Distinguish spending funded by operating cash or equity from bonds, bank loans, and private credit. Debt adds repayment and refinancing obligations.
- What is actually committed? Separate capital already funded from announced plans and future-dated or contingent commitments. Read the conditions and timing rather than treating all announced amounts as cash already spent.
- How concentrated is the exposure? Consider whether a company, lender, or investor depends heavily on one counterparty or has overlapping exposure through multiple companies and financing channels.
- What do the figures measure? Check the source’s date, geography, dataset, and denominator. Deal count and deal value, for example, can produce sharply different shares.
These checks do not predict whether a firm will succeed. They help distinguish ordinary commercial coordination from a structure whose counterparties may be vulnerable to the same funding or demand shock.
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