Big Tech Pays Itself in Cloud Loop
In brief
- Big Tech companies are paying themselves through their own cloud bills, sparking AI bubble fears.
- This is happening through a round-trip funding loop where a tech giant invests in an AI startup and the startup uses that money to pay for cloud services from the same tech giant.
- The numbers are significant, with OpenAI and Anthropic holding over half of the roughly $2 trillion in future cloud commitments from Microsoft, Amazon, Google, and Oracle.
- OpenAI's annual cloud bill has reportedly ballooned past $60 billion, while its actual revenue sits closer to $25 billion.
- This loop is legal under current accounting rules, but it raises concerns about the sustainability of the AI boom.
- As AI startups begin to operate outside of this protected loop, they will face budget meetings and real revenue expectations, which could lead to a burst in the AI bubble, and the impact will be seen in the future.
Terms in this brief
- Cloud Loop
- A situation where tech companies invest in AI startups and those startups use the funds to pay for cloud services from the same tech giants. This creates a cycle of financial dependency that raises concerns about the sustainability of the AI boom.
Read full story at Yahoo Finance →
More briefs
Deepseek Permanently Cuts AI Model Prices, Undercutting Competitors
Deepseek has made its steep discount on the V4-Pro model permanent. Now priced at $0.435 per million input tokens, it's at least 11.5 times cheaper than GPT-5.5 and over 34 times cheaper for output tokens. This move could put pressure on Western providers struggling to match these prices. For developers and researchers, this pricing makes Deepseek a more attractive option for token-hungry systems like agentic AI. The lower costs could accelerate adoption of such systems globally, especially in regions where cost is a major factor. This shift underscores the growing competition in AI pricing. As other providers respond, we'll likely see further price reductions and innovations in model efficiency to stay competitive.
AI Reduces US Monthly Payroll Growth
AI has reduced US monthly payroll growth by roughly 16,000 jobs in the past year. This is due to automation replacing certain tasks. Knowledge workers are most affected as their output can be replicated by AI. AI will continue to change the job market in the coming years.
UC Tech Workers Vote for Union Representation
University of California tech workers voted to seek union representation. They are concerned about layoffs and want a say in how the university uses artificial intelligence. The vote could create the largest tech worker bargaining unit in the country with 8,400 members. Union activists say workers who understand AI should help shape its use at the university. The university is reviewing the union's petition and awaits guidance from the state's public employment relations board. The tech workers will likely push for job security and a role in designing new technology as they move forward with union representation.
Meta Lays Off 8,000 Employees
Meta laid off 8,000 employees to offset its AI investments. This is around 10 percent of the company. The company is spending a lot of money on AI. It plans to spend $115 billion to $135 billion in 2026. This is almost double what it spent in 2025. Meta is also moving employees to work on new AI projects. The layoffs are now underway and some employees have posted about it on LinkedIn. Meta will continue to make changes to its business.
Pharma Companies Partner with AI Firms
Eli Lilly and Bristol Myers Squibb have partnered with AI companies to improve drug development. Bristol Myers Squibb will use Anthropic's Claude model to streamline workflows and improve data analysis. Lilly will integrate its AI engine into Collaborative Drug Discovery's database to share research data with other companies. This will give biotechs access to decades of Lilly's research data to train their models. New partnerships will help the biopharma industry use artificial intelligence to develop new drugs faster. The industry will continue to change with more AI deals in the future.