Jim Cramer warns AI's circular financing echoes the dot-com bubble

Amazon.com is reportedly considering moving roughly $8 billion of Nvidia Grace Blackwell chips into a special-purpose vehicle financed by outside investors and then leasing the hardware back, a structure that would make part of its AI buildout more asset-light as capital spending is expected to reach $220 billion this year. AWS revenue rose 37% to $42.2 billion in the second quarter, its fastest growth in more than four years, and contract backlog reached $496 billion, while CEO Andy Jassy said the company still lacks enough capacity to meet demand. Trailing-12-month free cash flow swung to negative $7.6 billion from positive $18.2 billion a year earlier as infrastructure spending accelerated. Amazon trades at 23.64 times forward earnings, and Tigress Financial recently raised its target to $385 from $315, arguing earnings from the investment cycle are approaching an inflection point where they grow faster than operating capital. The proposal also raises the question of residual chip value, since Grace Blackwell will eventually be superseded by Vera Rubin while Amazon assumes semiconductor generations remain useful for at least five years.

GlobalFoundries announced FDX Fusion, a next-generation FD-SOI platform to be developed and manufactured in Dresden for highly integrated, energy-efficient Physical AI chips spanning sensing, compute, control and connectivity functions. The platform blends seven nanometer class digital performance with advanced RF, analog and embedded memory on a single chip aimed at edge and automotive, industrial and consumer AI systems. The launch fits GlobalFoundries' broader shift away from weaker smart mobile demand toward automotive, industrial, communications and AI applications, though it does not immediately change the near term risk that higher investment and oversubscribed niches like SiGe could still coexist with only high 80s percent fab utilization. Among recent announcements, a US$2 billion, five year silicon interposer deal with TSMC reinforces GlobalFoundries' role in AI hardware supply alongside FDX Fusion, with the Dresden FDX roadmap and Malta advanced packaging capacity sitting squarely against the key catalyst of moving its revenue mix toward higher value, AI linked processes. GlobalFoundries' narrative projects $10.4 billion revenue and $1.7 billion earnings by 2029, requiring 14.5% yearly revenue growth and a roughly $1.0 billion earnings increase from $716.0 million today, while the most optimistic analysts already assumed about US$11.7 billion of revenue and US$2.3 billion of earnings by 2029.

Nvidia is in early-stage discussions to acquire or increase its investment in Reflection AI, a U.S. startup focused on developing open-weight models, the Financial Times reported, citing people familiar with the discussions. The structure of a potential deal could take several forms, including a so-called acqui-hire that would let Nvidia hire staff and license technology while avoiding antitrust scrutiny tied to a full acquisition, and deal terms currently under discussion were not available. Nvidia, the world's most valuable company, has already invested $800M into Reflection, which was last valued at $25B in a March funding round. Nvidia, whose CEO Jensen Huang has in the past called for an open-weight ecosystem for AI, could also make an additional equity investment in Reflection or reach an agreement to supply more chips or computing power to the company. Multiple people with knowledge of the matter said a deal could be reached in the coming weeks, while cautioning that the companies could also walk away from the talks; Nvidia and Reflection did not respond to the Financial Times' requests for comment.

HSBC upgraded Synopsys to Buy from Hold on September 25 and raised its price target from $490 to $700, implying a multiple of nearly 35 times HSBC's fiscal 2027 EPS estimates. Analyst Frank Lee said the company is evolving beyond its traditional slow-growth software profile as its licensing-plus-royalty model and agentic AI tools create a new path to benefit from AI. The upgrade follows Synopsys' fiscal third-quarter results, when revenue rose 42% to $2.48 billion, including approximately $711 million from Ansys, alongside higher full-year guidance. Synopsys announced a multiyear agreement worth more than $1 billion with Amazon on September 30, combining IP licensing with production-linked royalties, though the company has said revenue synergies from Ansys will not begin until fiscal 2027. The stock trades at approximately 61 times the midpoint of management's fiscal 2027 GAAP EPS guidance, or roughly 28 times adjusted earnings, and carries about $7 billion more debt than cash, largely tied to the Ansys deal.

Alphabet Inc. has launched a prototype Tensor Processing Unit satellite aboard SpaceX's Transporter-18 mission on October 1, 2026, in partnership with Planet, marking its first concrete step toward putting data centers in orbit. The test, part of Google's Project Suncatcher, will examine how its TPUs handle launch stress, radiation, and extreme temperatures in low Earth orbit, with ground testing already showing Trillium TPUs can withstand radiation levels higher than those expected across a five-year mission. Heat management remains a key challenge because conventional air cooling does not work in a vacuum, prompting Google to evaluate heat pipes and radiators, and a two-satellite test is planned for 2027. Google emphasized the current mission is intended to collect engineering data rather than demonstrate a commercial system. SpaceX could benefit from additional orbital AI experiments if hyperscalers continue choosing its launch services, even as its valuation of over $2 trillion at about 45 times forward sales rests on management's own targets, including Elon Musk's expectation of a $100 billion annual revenue run rate by December and a $1 trillion revenue target moved up to 2030.