Jim Rickards Says a Single "Magic Trick" Is Propping Up AI, the Same One That Sank Telecom in 2000.
A former CIA and Pentagon advisor explains the "circular financing" pattern he says is manufacturing the illusion of demand behind the AI boom
Baltimore, MD, Aug. 03, 2026 (GLOBE NEWSWIRE) -- The AI boom looks like it's being driven by overwhelming customer demand. Jim Rickards says a good deal of that demand may be manufactured, by the AI companies themselves. In a new presentation, the former advisor to the CIA and the Pentagon explains a money-go-round he believes sits at the center of the boom, and why it echoes the exact scheme that inflated telecom stocks before the dotcom crash.
The "Magic Trick" at the Center of the Boom
Rickards argues that the most important thing about the AI bubble is not its size but the sleight of hand keeping it inflated. "At the heart of this bubble is a magic trick," he says, "a financial sleight of hand that allows AI companies to effectively move money from their left pocket to their right."
The purpose of that maneuver, in his telling, is to make demand look far stronger than it really is. "It has allowed them to create the 'illusion of demand,'" Rickards says. And that illusion, he notes, is not new: "it's the same 'trick' that's been used to prop up bubbles before."
We've Seen This Trick Before
To show how it works, Rickards points to a telecom company that dominated the 1990s. That company, he explains, lent billions to cash-strapped customers, who then used the borrowed money to buy the company's own equipment. The sale was booked as revenue, even though the cash had come from the company itself.
"They were effectively moving money from their left pocket to their right and calling it revenue," Rickards says. "They were creating the illusion of demand." The technical name for it, he notes, is straightforward: "This is known as circular financing." It worked until the dotcom bubble burst, at which point the illusion collapsed and the stocks that had ridden it fell through the floor.
And It May Be the Biggest Version Yet
When Rickards looks at AI today, he sees the same pattern on a far larger stage: a leading chipmaker investing in the startups that then turn around and buy its chips, and AI companies funding one another's build-outs while the money circles back. "This might be one of the biggest circular financing schemes in history!" he says.
To him, it is a sign of desperation, not strength. "The AI industry is such a money pit we're seeing it take desperate steps like circular financing and dusting off the play book for CDO's to keep the bubble going," Rickards says. And history, in his view, is unambiguous about how these arrangements end: "they just set us up for a bigger and bigger collapse." He frames it as his own analysis rather than a certainty, but his point is that demand propped up by a company's own money is not real demand, and that eventually the market figures that out.
About the Presentation
In his new presentation, Jim Rickards explains the circular-financing pattern he sees behind the AI boom, why he believes it mirrors the schemes that preceded past crashes, and the steps he says investors can take to protect themselves if the illusion breaks.
Jim Rickards' presentation is now available online for free. Click here to watch.
About Jim Rickards and Paradigm Press
Jim Rickards is a former advisor to the CIA and the Pentagon and the founder of Strategic Intelligence. A lawyer by training, he once spent five days on the phone with the Federal Reserve helping to contain the collapse of a hedge fund that nearly brought down the financial system, and he later warned of the 2008 crisis before it struck.
Paradigm Press is one of the largest independent financial research publishers in the United States, rated 4.8 stars on Google across more than 1,900 reviews.
Derek Warren Public Relations Manager Paradigm Press Group Email: dwarren@paradigmpressgroup.com
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
