When does Java type inference produce an infinite type?

The following code sends javac to an infinite loop. Presumably, it tries to build an infinite type, but does not manage to represent it as a finite cyclic data structure.

interface I<T> {}
interface A<T> extends I<A<A<T>>>{}
abstract class X {
    abstract <T> T foo(T x, T y);

    void bar(A<Integer> x, A<String> y){
        foo(x, y);
    }
}