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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →Circular AI deals are overlapping investment, financing and commercial relationships—for example, when a company invests in an AI firm that then buys compute or other infrastructure from a connected company. These ties can help secure scarce capacity, but they may also make it harder to see how much demand is independently funded and how a slowdown could spread through investors, suppliers and lenders. Regulators identify risks to monitor, not proof that a crisis is inevitable or that every linked deal is unsound.
What are circular AI deals?
“Circular financing” describes a pattern in which investment, lending and commercial relationships overlap among companies. Imagine an infrastructure provider investing in an AI company, while that AI company commits to buying the provider’s computing capacity. The investment may help the AI company finance growth; the purchase commitment may support the provider’s plans to build more capacity. If demand later weakens, both firms could be exposed to the same shortfall.
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That example is not automatically improper, and not every investor-supplier relationship is circular financing. The important question is whether the links reinforce one another in a way that affects funding, revenue or risk. The Bank for International Settlements (BIS) distinguishes investment ties from commercial supply-chain relationships; the presence of both is a more specific connection than either one alone.
Such arrangements can be commercially useful. AI firms may need to secure critical inputs, while investors and counterparties may have limited information about a young company’s prospects. BIS Bulletin 137 describes these ties as reflecting “the need to secure critical inputs and the presence of information asymmetries,” while also warning of macroeconomic risks and greater opacity. The bulletin’s authors are Jon Frost, Rudraksh Kansal, Kumar Rishabh, Vatsala Shreeti, and Leanne Si Ying Zhang; it says its views are theirs and do not necessarily reflect those of the BIS or its member central banks.
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What the BIS data show about AI-to-AI deals
BIS Bulletin 137, published 1 October 2026, analyzes AI-firm investment deals and commercial supply-chain links using data from 2021 through 2025. Its figures describe the dataset and its definitions; they do not mean that every deal was circular, risky or improper.
| Measure | BIS finding for 2021–2025 | How to read it |
|---|---|---|
| Investment deals by value targeting another AI firm | 28.7% | Share of AI firms’ investment-deal value in which the target was an AI firm. |
| Incoming investment in AI firms from other AI firms | 55.2% | Share of incoming investment in AI firms that came from other AI firms. |
| AI-to-AI investment deals also involving a commercial supply-chain relationship | 16.1% by deal count; 46.4% by deal value | Count and value produce different shares: the value share is larger, but neither figure means that all AI-to-AI deals had a commercial link. |
The figures answer different questions and use different denominators. In particular, the last row is not a single share: it reports how often a commercial relationship appeared among AI-to-AI investment deals when measured by number of deals and by their value.
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How connected deals can transmit a shock
Demand or earnings fall short
AI infrastructure requires investment ahead of expected use. If customers do not adopt services as quickly as expected, or revenue falls short of forecasts, an AI firm may reduce spending. A supplier that counted on that customer’s purchases can then face weaker expected revenue, while an investor may see the value of its stake deteriorate. The same event can affect multiple connected firms without any of them having acted improperly.
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchThe productivity payoff from AI is also uncertain and may vary across sectors and countries. In its 28 July 2026 bulletin on the global macroeconomic effects of the AI boom, BIS notes that the eventual gains remain uncertain and uneven. If expected productivity or demand does not materialize on schedule, investment plans and valuations may be revised.
Debt leaves fixed obligations after the boom slows
Building data centers and other infrastructure requires substantial upfront financing. BIS Bulletin 120, published 7 January 2026, says firms’ anticipated investment needs are pushing them beyond operating cash flows toward debt, with private credit playing a rapidly increasing role. The IMF’s April 2026 Global Financial Stability Report, Chapter 1, describes AI-related capital spending supported by bonds, leveraged loans and intercorporate arrangements, which can sometimes form circular financing structures.
Debt shifts some exposure from technology companies to lenders, bondholders, private-credit funds and other investors. Unlike a plan to raise equity or an optional future purchase, a funded loan generally creates repayment obligations. If revenue disappoints, debt service and refinancing needs can remain even as growth plans are cut. The IMF warns that cash buffers and earnings could prove insufficient to meet future spending, creating potential balance-sheet pressure; that is a risk scenario, not a finding that every company is short of cash.
Concentrated positions can reprice together
The European Central Bank’s May 2026 Financial Stability Review highlights concentrated exposures across public and private equity and debt markets, alongside rising credit financing. If many investors and lenders are exposed to a small group of central firms or rely on similar expectations for AI growth, a change in those expectations can prompt correlated repricing across markets.
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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 drawn from the cited research and ECB calculation, not an AI-specific forecast. At the review date, the ECB said business-debt growth remained low in the United States and euro area.
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Opacity makes the network harder to assess
Investment stakes, loans, purchase commitments and infrastructure financing do not all appear in the same place or carry the same obligations. A headline commitment may be conditional or future-dated rather than funded immediately; a commercial contract is not automatically a loan or guarantee. If those distinctions are blurred, investors may struggle to determine who ultimately bears losses or how much demand depends on linked counterparties. BIS and the IMF both identify opacity or complex interconnections as concerns.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What official assessments do—and do not—say
The institutional assessments describe channels through which risk could build, not a prediction that the AI boom will cause a financial crisis. BIS Bulletin 120 assessed macrofinancial risks as moderate in January 2026, while warning that the sustainability of the buildout depended on firms meeting high earnings expectations. The ECB’s May review pointed to credit financing and concentrated exposures as issues to monitor, but noted low US and euro-area business-debt growth at that time.
These assessments have dates and scopes: the BIS deal analysis covers 2021–2025; the IMF chapter is from April 2026; and the ECB review’s cited section uses data through 19 May 2026. Conditions can change, and the institutions’ warnings should not be turned into claims that AI-related debt has already caused a crisis. Nor does a supply contract alongside an investment establish misconduct: firms may be coordinating capacity or securing inputs for ordinary commercial reasons.
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How to assess whether two deals are meaningfully connected
To compare arrangements, separate the relationships and ask who funds whom, who buys from whom, and who carries the downside. The same pair of companies can have more than one connection, but those connections need not have equal financial significance.
- Identify the instrument. Is the link an equity investment, a loan, a guarantee, a purchase commitment, or a combination? Each creates different rights and obligations.
- Map the commercial relationship. Is the investor also a supplier or customer? How much of the target’s expected revenue depends on that relationship?
- Trace the source of funds. Is spending supported by operating cash, equity, bonds, bank loans or private credit? Follow financing through counterparties rather than treating all investment as equivalent.
- Check what is actually committed. Distinguish capital already funded and unconditional obligations from contingent, announced or future-dated commitments.
- Look for concentration. Would one company’s trouble affect several investors, infrastructure providers or lenders at once? Are exposures concentrated among a few counterparties or financiers?
- Check the date and definition. A statistic may describe deal count, deal value, a particular geography or a defined period. Confirm which one before applying it to a specific company or market.
The practical dividing line is not simply whether two firms are connected. It is whether overlapping commitments make both sides dependent on the same uncertain future demand, and whether debt or concentrated financing could amplify the consequences if that demand disappoints.
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