A recent bulletin from the Bank for International Settlements (BIS) reveals that 55.2% of investments into AI companies between 2021 and 2025 originated from other firms within the same sector. The study, titled 'Circular relationships among AI firms,' analyzed 1,246 companies and identified 972 instances of intra-industry funding.
The research highlights that while supplier-customer investment deals account for only 16.1% of total transactions by count, they represent 46.4% of the total deal value. These large-scale arrangements often involve hyperscalers, which simultaneously invest in AI startups and secure supply commitments for hardware and cloud services.
The BIS notes that such circular financing can offer strategic benefits, such as reduced information asymmetry and guaranteed access to critical resources. However, the report also warns of potential risks, including increased market opacity, concentration of capital, and the possibility of contagion during periods of financial stress.
Regulators are encouraged to demand clearer reporting on cross-holdings and supply commitments to improve market transparency. Analysts are advised to distinguish between organic demand and revenue generated through supplier-financed customer spending, as these circular structures may complicate the assessment of company valuations.
