Both are taken into account. Potential profitability is taken into account with growth companies. Circular funding has no effect on that. With unprofitable companies case is made on how risky the company is and what the potential profit will be in the future.

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mvkel 14 hours ago | parent [-]

I would disagree, at least in the short term. Exhibit A: AMD's stock rose 36% at the announcement of their OpenAI circular deal. If 1+1 = 3 and there is potential profit to be gleaned from such a deal, then it isn't circular, and is just plain good business. But the fact that AMD's stock collapsed back to where it was shortly after suggests otherwise

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mewpmewp2 13 hours ago | parent [-]

This isn't to do with this being circular. It is moreso that AMD is thought to be falling behind in AI race, but OpenAI doing a deal with them is a strong indicator that they might have potential to come back.

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mvkel 13 hours ago | parent [-]

That's a generous interpretation.

The deal allows OpenAI to purchase up to 6GW of AMD GPUs, while AMD grants OpenAI warrants for up to 10% equity tied to performance milestones, creating a closed-loop of compute, equity, and potential self-funding hardware purchases. Circular.

From the announcement per se, AMD's stock rose to a level that effectively canceled out whatever liabilities they were committing to as part of the deal, so it was all gravy, despite it being a press release

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mewpmewp2 12 hours ago | parent [-]

Why is that generous? This is clearly showing OpenAI's belief in AMD, which in turn would give investors a large amount of confidence. A lot of that market cap came from Nvidia, which lost around 50B that day while AMD gained 70B in market cap. It all makes sense to me.

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mvkel 12 hours ago | parent [-]

Why would it erase that same 70B just a week later? No more confidence?

	▲	mewpmewp2 12 hours ago \| parent [-]
		Where do you see the 70B being erased? But in any case it is also plausible that a confidence changes given new stream of constant information, so I don't see how it would be problematic if it did lose given new information.