On-Three-Chain (OTS): A Conceptual Framework for Analysing Circular Capital Flows in the Artificial Intelligence Industry

Abstract. The rapid expansion of artificial intelligence (AI) has produced a dense and increasingly opaque web of financial relationships in which investors, chip suppliers, cloud providers, and model developers simultaneously act as financiers, suppliers, and customers of one another. Although these arrangements are widely described as "circular deals," no disciplined conceptual instrument exists to define, decompose, compare, and measure them. This paper formalises On-Three-Chain (OTS) as a conceptual framework for analysing the economic interconnection of three chains in the AI industry: (1) the capital and investment chain; (2) the infrastructure and compute chain; and (3) the AI product and revenue chain. The framework specifies the actors, flow types, feedback loops, and formal quantities, including a circularity ratio and a concentration measure, that connect the three chains; introduces a four-stage taxonomy of circularity running from benign coordination to fragile self-reference; and proposes eight testable propositions and five measurable risk indicators with explicit data requirements. The paper situates OTS within four literatures: the economics of AI, compute and capital intensity, vendor and circular financing, and Minsky's financial instability hypothesis. It also connects the framework to recent institutional analyses of AI-related financial stability by the BIS, IMF, ECB, and FSB. Part II extends the framework with an industrial precedent analysis of telecommunications vendor financing (1999–2003), a threshold-cascade simulation on a synthetic network, a measurement methodology applied to four publicly reported ecosystems, a policy and governance mapping, and three illustrative scenarios to 2030. The paper does not assert fraud or a bubble; it provides a structured, testable lens. The paper contains 20 figures, 21 tables, and Appendices A–G, including a Data Source Register and a Case Source Register with verification status. Keywords: artificial intelligence; AI economics; circular financing; vendor financing; capital structure; financial instability; compute infrastructure; contagion; OTS; conceptual framework.