The AI boom may not be as real as it seems.
Former Intel (INTC) CEO Pat Gelsinger said the largest players in artificial intelligence are now funding their own development.
“The quality of the revenue that they’re promising in the future is not that good at all, right? Because essentially I’m buying my own future revenue,” Kissinger, xLight’s current executive chairman, said on Yahoo Finance’s Market Catalyst. “Because it’s not you putting your money at risk, I’m putting mine at risk.”
Deals, investments and credits are emerging among Microsoft (MSFT), OpenAI (OPAI.PVT), Google (GOOGL, GOOG), Anthropic (ANTH.PVT) and Amazon (AMZN), creating what Gelsinger calls “circular financing.” The result is an ecosystem where AI providers effectively safeguard their growth. This may make headlines, but it creates problems for investors who rely on real-world adoption and sustainable profits.
Circular structures are nothing new in the tech world. Cloud providers have subsidized early adoption a decade ago. But the scale of AI is unprecedented. For example, Microsoft is a major investor in OpenAI, which has spent billions on Microsoft’s Azure cloud service, which relies heavily on Nvidia’s (NVDA) graphics processing units (GPUs). Meanwhile, Google is pouring money into Anthropic, which also buys computing power from Google Cloud.
Read more: How to protect your portfolio from the AI bubble
Kissinger said these massive balance sheets were being used “in creative ways,” but they created the illusion of unstoppable demand – even as corporate buyers, regulators and power grids struggled to keep pace.
Demand provided by suppliers does not equate to customers opening their wallets, he added. He did not sound the alarm, however, as the major players were “healthy companies with healthy balance sheets.”
Yet even as more customer demand emerges, there is a physical ceiling to the AI boom: electricity. “We are not capital-constrained in AI. We are energy-constrained in AI,” Kissinger said. Training cutting-edge models requires a staggering amount of computing power—and those chips run hot. The grid is a binding constraint. “
Kissinger’s comments come as he begins a new phase in his career. He abruptly resigned from Intel in December 2024 due to tensions with the board of directors, and returned as executive chairman of semiconductor startup xLight in March 2025.
The company claims it is “making the world’s most powerful lasers,” and recently announced it signed a $150 million letter of intent with the U.S. Department of Commerce. The non-binding agreement is reportedly funded in part by the Chips and Science Act of 2022, which aims to restore U.S. semiconductor leadership. While the deal is preliminary and subject to revision, the deal demonstrates Capitol Hill’s interest in the emerging technology.