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The ‘loopification’ of AI is making me dizzy

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Welcome to Eye on AI, with AI reporter Sharon Goldman. In this edition, the ‘loopification’ of AI…Trump eyes state AI laws…Meta will partner with Yann LeCun’s new startup…andAI is now the fastest-adopted technology in history.

On Tuesday, Microsoft, Nvidia, and Anthropic announced strategic partnerships that Microsoft CEO Satya Nadella summed up this way: “We are increasingly going to be customers of each other.”

How very “Here we go round the mulberry bush,” right? Microsoft buys Anthropic’s models; Anthropic runs Claude on Microsoft’s Azure cloud; Anthropic buys Nvidia’s chips; and both Microsoft and Nvidia invest in Anthropic. If that sounds like a big circle going round and round and back again… that’s because it is. And honestly, it’s making me dizzy.

But this trio-loop-de-loop isn’t an anomaly. These days, it’s becoming the dominant business model of the AI industry. Hyperscalers, model labs and infrastructure companies are increasingly forming closed-loop partnerships that function as a kind of AI mutual-assurance pact: everyone is a partner, a vendor, and a customer at the same time.

For Nvidia, which blew past revenue targets in its Q3 earnings yesterday, posting a 62% surge in revenue growth, this kind of circle game has been a key to its success over the past three years. As Fortune’s Shawn Tully recently detailed, the company has been building its own circular ecosystem by investing in—and sometimes financing—its own customers, from OpenAI to CoreWeave. The goal is to engineer a perpetual-motion machine of GPU consumption—a way to guarantee demand in a world where hyperscalers are trying to build their own chips. For example, in September Nvidia committed to investing up to $100 billion in OpenAI. As part of the agreement, OpenAI would purchase “at least 10 gigawatts worth of capacity in Nvidia AI chips. “It’s very murky,” Seaport analyst Jay Goldberg said recently. ““It’s very unclear what the motivation here is … To what degree is Nvidia investing versus buying demand or subsidizing demand [for its chips]?”

There are plenty of other non-Nvidia loops as well. Anthropic, for instance, has long had a similar arrangement with Amazon: Amazon is a major investor in Anthropic, which instantly gave Anthropic access to AWS infrastructure, Amazon’s custom Tranium chips, and a major partner for training and running its AI models. Amazon, in turn, gets a revenue boost in its cloud and AI chip businesses. More recently, OpenAI announced a multiyear partnership in October with AMD—OpenAI gets 6 gigawatts of AMD GPUs, while AMD gives OpenAI the option to buy up to 10% of the company. AMD gets guaranteed demand; OpenAI gets a second chip supplier. Another loop.

There are sovereign loops, too: Just yesterday, AMD, Cisco and Saudi-backed HUMAIN formed a joint venture to build up to 1 gigawatt of AI infrastructure in the Saudi Kingdom. Each company is both an investor and an exclusive supplier—AMD and Cisco put money into the joint venture, and the joint venture is then contractually designed to buy AMD’s GPUs and Cisco’s networking gear, all inside HUMAIN’s Saudi data centers. It’s the same circular logic: investors fund the suppliers, the suppliers buy from the investors, and everyone gets to tout massive growth. 

And Nvidia isn’t absent from this one either: it also announced a partnership with HUMAIN yesterday —alongside Elon Musk’s xAI—to build a major new AI data center in Saudi Arabia.

Is “loopification” bad? Well, Nvidia has long profited from it, and startups like OpenAI and Anthropic likely would not be where they are today without it. But there are inherent risks:  Concentrated power within a tiny group of players; huge debt among companies that haven’t yet proven sustainable business models; blurry real market signals that makes it harder to tell whether there is real demand. What would happen if one of the players in the circle stumbles? And what happens to the players left out of the circle? 

Circle games, after all, are fun. But we all know what happens at the end of “Ring Around the Rosy” — they all fall down. Nvidia’s strong quarterly results may have calmed AI bubble fears–for now–but how long can this loop-de-loop business model continue? I don’t know the answer. But at this point, I might need some Dramamine.  

With that, here’s more AI news.

Sharon Goldman
sharon.goldman@fortune.com
@sharongoldman

FORTUNE ON AI

Nvidia says it has ‘visibility to a half a trillion dollars’ in revenue through 2026. That would make it one of America’s biggest companies — Matthew Heimer

Nvidia CEO Jensen Huang earnings call namechecked Saudi AI company Humain three times. Here’s why — Jeremy Kahn

The stock market is barrelling toward a ‘show me the money’ moment for AI—and a possible global crash — Jim Edwards

AI’s power and water consumption is worrying the agriculture sector: ‘Don’t forget that it is also required for us to grow food’ — Angelica Ang

Nvidia blows past revenue targets and forecasts trillions in AI infrastructure spending by end of decade — Sharon Goldman

AI IN THE NEWS

Trump’s draft executive order targets state AI Laws. President Donald Trump is weighing a challenge to state AI regulations, according to a leaked draft reported by Reuters. The executive order aims to override state AI laws through litigation and by conditioning access to federal funding. The draft specifically criticizes California’s SB 53, calling it “complex and burdensome.” The order would create an AI Litigation Task Force to sue states and could withhold broadband funding from those with stringent AI rules. The proposal follows Trump’s push to attach similar preemption measures to the upcoming Defense Authorization Act bill. It is likely to face pushback at the state level and has already sparked MAGA backlash. Read more in Reuters. 

Meta will partner with Yann LeCun’s new startup. Meta’s long-serving AI chief is leaving the company for his own startup. LeCun said in a post on LinkedIn that he was building a startup to carry forward the Advanced Machine Intelligence (AMI) research he had been working on at Meta’s FAIR and NYU. Last week, the Financial Times reported that LeCun was planning to launch his own start-up and was in early talks to raise funding for it. He called the creation of FAIR—Meta’s AI research Lab—his proudest non-technical accomplishment. Read the full post here.

Google DeepMind expands its robotics push with a new hire. Google DeepMind hired the former chief technology officer of Boston Dynamics, Aaron Saunders, as the company’s new VP of hardware engineering earlier this month, according to a report from Wired. The move is part of CEO Demis Hassabis’ DeepMind’s ambition to transform Gemini into an operating system for physical robots. Hassabis has previously said DeepMind is trying to build an AI system that can work “out-of-the-box, across any body configuration.” Boston Dynamics, known for its advanced legged robots, was  actually briefly owned by Google, which acquired the company in 2013 and sold it four years later. While at the company, Saunders worked on an amphibious six-legged prototype before becoming CTO in 2021. Read more in Wired.

Europe scales back its privacy and AI laws. The EU has proposed a series of changes to its landmark privacy rules, GDPR, and a delay to major provisions of the AI Act. The proposal would ease data-sharing restrictions, allow personal data to be used for AI training under certain conditions, extend compliance deadlines for high-risk AI systems, and cut down on Europe’s ubiquitous cookie pop-ups. The Commission frames the changes as pro-innovation simplification, but leaked drafts have already sparked backlash from civil rights groups and lawmakers who say the EU is caving to pressure from Big Tech. Read more in The Verge.

AI CALENDAR

Nov. 26-27: World AI Congress, London.

Dec. 2-7: NeurIPS, San Diego.

Dec. 8-9: Fortune Brainstorm AI San Francisco. Apply to attend here.

Jan. 7-10: Consumer Electronics Show, Las Vegas. 

March 12-18: SWSW, Austin. 

March 16-19: Nvidia GTC, San Jose. 

April 6-9: HumanX, San Francisco. 

EYE ON AI NUMBERS

60%

That’s the percentage of adults in the U.S. who have tried generative AI since the launch of OpenAI’s ChatGPT, according to a new report from the Computer and Communications Industry Association. This also makes it the fastest-adopted technology in history.

According to the 2025 SPICE AI Report, roughly three in five U.S. adults have now used GenAI in less than three years, outpacing the adoption curves of both smartphones and the internet. Daily use of GenAI among U.S. adults jumped from 12% to 17% over just eight months, while workplace integration is accelerating even faster. Around 40% of workers now use AI tools at work, reporting an average 15% boost in productivity. Among AI-using employees, daily usage surged from 21% to 31% between March and July 2025. Most AI-users, 77%, also have a favorable impression of the technology—a feeling that is trending more positive over time, according to the report.



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Senate Dems’ plan to fix Obamacare premiums adds nearly $300 billion to deficit, CRFB says

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December 5, 2025

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The Committee for a Responsible Federal Budget (CRFB) is a nonpartisan watchdog that regularly estimates how much the U.S. Congress is adding to the $38 trillion national debt.

With enhanced Affordable Care Act (ACA) subsidies due to expire within days, some Senate Democrats are scrambling to protect millions of Americans from getting the unpleasant holiday gift of spiking health insurance premiums. The CRFB says there’s just one problem with the plan: It’s not funded.

“With the national debt as large as the economy and interest payments costing $1 trillion annually, it is absurd to suggest adding hundreds of billions more to the debt,” CRFB President Maya MacGuineas wrote in a statement on Friday afternoon.

The proposal, backed by members of the Senate Democratic caucus, would fully extend the enhanced ACA subsidies for three years, from 2026 through 2028, with no additional income limits on who can qualify. Those subsidies, originally boosted during the pandemic and later renewed, were designed to lower premiums and prevent coverage losses for middle‑ and lower‑income households purchasing insurance on the ACA exchanges.

CRFB estimated that even this three‑year extension alone would add roughly $300 billion to federal deficits over the next decade, largely because the federal government would continue to shoulder a larger share of premium costs while enrollment and subsidy amounts remain elevated. If Congress ultimately moves to make the enhanced subsidies permanent—as many advocates have urged—the total cost could swell to nearly $550 billion in additional borrowing over the next decade.

Reversing recent guardrails

MacGuineas called the Senate bill “far worse than even a debt-financed extension” as it would roll back several “program integrity” measures that were enacted as part of a 2025 reconciliation law and were intended to tighten oversight of ACA subsidies. On top of that, it would be funded by borrowing even more. “This is a bad idea made worse,” MacGuineas added.

The watchdog group’s central critique is that the new Senate plan does not attempt to offset its costs through spending cuts or new revenue and, in their view, goes beyond a simple extension by expanding the underlying subsidy structure.

The legislation would permanently repeal restrictions that eliminated subsidies for certain groups enrolling during special enrollment periods and would scrap rules requiring full repayment of excess advance subsidies and stricter verification of eligibility and tax reconciliation. The bill would also nullify portions of a 2025 federal regulation that loosened limits on the actuarial value of exchange plans and altered how subsidies are calculated, effectively reshaping how generous plans can be and how federal support is determined. CRFB warned these reversals would increase costs further while weakening safeguards designed to reduce misuse and error in the subsidy system.

MacGuineas said that any subsidy extension should be paired with broader reforms to curb health spending and reduce overall borrowing. In her view, lawmakers are missing a chance to redesign ACA support in a way that lowers premiums while also improving the long‑term budget outlook.

The debate over ACA subsidies recently contributed to a government funding standoff, and CRFB argued that the new Senate bill reflects a political compromise that prioritizes short‑term relief over long‑term fiscal responsibility.

“After a pointless government shutdown over this issue, it is beyond disappointing that this is the preferred solution to such an important issue,” MacGuineas wrote.

The off-year elections cast the government shutdown and cost-of-living arguments in a different light. Democrats made stunning gains and almost flipped a deep-red district in Tennessee as politicians from the far left and center coalesced around “affordability.”

Senate Minority Leader Chuck Schumer is reportedly smelling blood in the water and doubling down on the theme heading into the pivotal midterm elections of 2026. President Donald Trump is scheduled to visit Pennsylvania soon to discuss pocketbook anxieties. But he is repeating predecessor Joe Biden’s habit of dismissing inflation, despite widespread evidence to the contrary.

“We fixed inflation, and we fixed almost everything,” Trump said in a Tuesday cabinet meeting, in which he also dismissed affordability as a “hoax” pushed by Democrats.​

Lawmakers on both sides of the aisle now face a politically fraught choice: allow premiums to jump sharply—including in swing states like Pennsylvania where ACA enrollees face double‑digit increases—or pass an expensive subsidy extension that would, as CRFB calculates, explode the deficit without addressing underlying health care costs.



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Netflix–Warner Bros. deal sets up $72 billion antitrust test

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4 hours ago

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December 5, 2025

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Netflix Inc. has won the heated takeover battle for Warner Bros. Discovery Inc. Now it must convince global antitrust regulators that the deal won’t give it an illegal advantage in the streaming market. 

The $72 billion tie-up joins the world’s dominant paid streaming service with one of Hollywood’s most iconic movie studios. It would reshape the market for online video content by combining the No. 1 streaming player with the No. 4 service HBO Max and its blockbuster hits such as Game Of Thrones, Friends, and the DC Universe comics characters franchise.  

That could raise red flags for global antitrust regulators over concerns that Netflix would have too much control over the streaming market. The company faces a lengthy Justice Department review and a possible US lawsuit seeking to block the deal if it doesn’t adopt some remedies to get it cleared, analysts said.

“Netflix will have an uphill climb unless it agrees to divest HBO Max as well as additional behavioral commitments — particularly on licensing content,” said Bloomberg Intelligence analyst Jennifer Rie. “The streaming overlap is significant,” she added, saying the argument that “the market should be viewed more broadly is a tough one to win.”

By choosing Netflix, Warner Bros. has jilted another bidder, Paramount Skydance Corp., a move that risks touching off a political battle in Washington. Paramount is backed by the world’s second-richest man, Larry Ellison, and his son, David Ellison, and the company has touted their longstanding close ties to President Donald Trump. Their acquisition of Paramount, which closed in August, has won public praise from Trump. 

Comcast Corp. also made a bid for Warner Bros., looking to merge it with its NBCUniversal division.

The Justice Department’s antitrust division, which would review the transaction in the US, could argue that the deal is illegal on its face because the combined market share would put Netflix well over a 30% threshold.

The White House, the Justice Department and Comcast didn’t immediately respond to requests for comment. 

US lawmakers from both parties, including Republican Representative Darrell Issa and Democratic Senator Elizabeth Warren have already faulted the transaction — which would create a global streaming giant with 450 million users — as harmful to consumers.

“This deal looks like an anti-monopoly nightmare,” Warren said after the Netflix announcement. Utah Senator Mike Lee, a Republican, said in a social media post earlier this week that a Warner Bros.-Netflix tie-up would raise more serious competition questions “than any transaction I’ve seen in about a decade.”

European Union regulators are also likely to subject the Netflix proposal to an intensive review amid pressure from legislators. In the UK, the deal has already drawn scrutiny before the announcement, with House of Lords member Baroness Luciana Berger pressing the government on how the transaction would impact competition and consumer prices.

The combined company could raise prices and broadly impact “culture, film, cinemas and theater releases,”said Andreas Schwab, a leading member of the European Parliament on competition issues, after the announcement.

Paramount has sought to frame the Netflix deal as a non-starter. “The simple truth is that a deal with Netflix as the buyer likely will never close, due to antitrust and regulatory challenges in the United States and in most jurisdictions abroad,” Paramount’s antitrust lawyers wrote to their counterparts at Warner Bros. on Dec. 1.

Appealing directly to Trump could help Netflix avoid intense antitrust scrutiny, New Street Research’s Blair Levin wrote in a note on Friday. Levin said it’s possible that Trump could come to see the benefit of switching from a pro-Paramount position to a pro-Netflix position. “And if he does so, we believe the DOJ will follow suit,” Levin wrote.

Netflix co-Chief Executive Officer Ted Sarandos had dinner with Trump at the president’s Mar-a-Lago resort in Florida last December, a move other CEOs made after the election in order to win over the administration. In a call with investors Friday morning, Sarandos said that he’s “highly confident in the regulatory process,” contending the deal favors consumers, workers and innovation. 

“Our plans here are to work really closely with all the appropriate governments and regulators, but really confident that we’re going to get all the necessary approvals that we need,” he said.

Netflix will likely argue to regulators that other video services such as Google’s YouTube and ByteDance Ltd.’s TikTok should be included in any analysis of the market, which would dramatically shrink the company’s perceived dominance.

The US Federal Communications Commission, which regulates the transfer of broadcast-TV licenses, isn’t expected to play a role in the deal, as neither hold such licenses. Warner Bros. plans to spin off its cable TV division, which includes channels such as CNN, TBS and TNT, before the sale.

Even if antitrust reviews just focus on streaming, Netflix believes it will ultimately prevail, pointing to Amazon.com Inc.’s Prime and Walt Disney Co. as other major competitors, according to people familiar with the company’s thinking. 

Netflix is expected to argue that more than 75% of HBO Max subscribers already subscribe to Netflix, making them complementary offerings rather than competitors, said the people, who asked not to be named discussing confidential deliberations. The company is expected to make the case that reducing its content costs through owning Warner Bros., eliminating redundant back-end technology and bundling Netflix with Max will yield lower prices.



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The rise of AI reasoning models comes with a big energy tradeoff

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December 5, 2025

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Nearly all leading artificial intelligence developers are focused on building AI models that mimic the way humans reason, but new research shows these cutting-edge systems can be far more energy intensive, adding to concerns about AI’s strain on power grids.

AI reasoning models used 30 times more power on average to respond to 1,000 written prompts than alternatives without this reasoning capability or which had it disabled, according to a study released Thursday. The work was carried out by the AI Energy Score project, led by Hugging Face research scientist Sasha Luccioni and Salesforce Inc. head of AI sustainability Boris Gamazaychikov.

The researchers evaluated 40 open, freely available AI models, including software from OpenAI, Alphabet Inc.’s Google and Microsoft Corp. Some models were found to have a much wider disparity in energy consumption, including one from Chinese upstart DeepSeek. A slimmed-down version of DeepSeek’s R1 model used just 50 watt hours to respond to the prompts when reasoning was turned off, or about as much power as is needed to run a 50 watt lightbulb for an hour. With the reasoning feature enabled, the same model required 7,626 watt hours to complete the tasks.

The soaring energy needs of AI have increasingly come under scrutiny. As tech companies race to build more and bigger data centers to support AI, industry watchers have raised concerns about straining power grids and raising energy costs for consumers. A Bloomberg investigation in September found that wholesale electricity prices rose as much as 267% over the past five years in areas near data centers. There are also environmental drawbacks, as Microsoft, Google and Amazon.com Inc. have previously acknowledged the data center buildout could complicate their long-term climate objectives. 

More than a year ago, OpenAI released its first reasoning model, called o1. Where its prior software replied almost instantly to queries, o1 spent more time computing an answer before responding. Many other AI companies have since released similar systems, with the goal of solving more complex multistep problems for fields like science, math and coding.

Though reasoning systems have quickly become the industry norm for carrying out more complicated tasks, there has been little research into their energy demands. Much of the increase in power consumption is due to reasoning models generating much more text when responding, the researchers said. 

The new report aims to better understand how AI energy needs are evolving, Luccioni said. She also hopes it helps people better understand that there are different types of AI models suited to different actions. Not every query requires tapping the most computationally intensive AI reasoning systems.

“We should be smarter about the way that we use AI,” Luccioni said. “Choosing the right model for the right task is important.”

To test the difference in power use, the researchers ran all the models on the same computer hardware. They used the same prompts for each, ranging from simple questions — such as asking which team won the Super Bowl in a particular year — to more complex math problems. They also used a software tool called CodeCarbon to track how much energy was being consumed in real time.

The results varied considerably. The researchers found one of Microsoft’s Phi 4 reasoning models used 9,462 watt hours with reasoning turned on, compared with about 18 watt hours with it off. OpenAI’s largest gpt-oss model, meanwhile, had a less stark difference. It used 8,504 watt hours with reasoning on the most computationally intensive “high” setting and 5,313 watt hours with the setting turned down to “low.” 

OpenAI, Microsoft, Google and DeepSeek did not immediately respond to a request for comment.

Google released internal research in August that estimated the median text prompt for its Gemini AI service used 0.24 watt-hours of energy, roughly equal to watching TV for less than nine seconds. Google said that figure was “substantially lower than many public estimates.” 

Much of the discussion about AI power consumption has focused on large-scale facilities set up to train artificial intelligence systems. Increasingly, however, tech firms are shifting more resources to inference, or the process of running AI systems after they’ve been trained. The push toward reasoning models is a big piece of that as these systems are more reliant on inference.

Recently, some tech leaders have acknowledged that AI’s power draw needs to be reckoned with. Microsoft CEO Satya Nadella said the industry must earn the “social permission to consume energy” for AI data centers in a November interview. To do that, he argued tech must use AI to do good and foster broad economic growth.



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