Oracle is going all-in on artificial intelligence infrastructure, pushing its debt into junk-bond territory.
CoreWeave’s revenue has been growing at lightning speed, but so has its debt.
10 stocks we like better than CoreWeave ›
There is a lot of talk about an artificial intelligence (AI) bubble. The echoes of 2000 are hard to ignore, with valuations reaching record highs and companies spending dizzying amounts of money on infrastructure. We’re racing to build as many giant AI data centers as possible. While it is possible that we are not in a bubble and truly “this time is different,” it is not unreasonable to think that current trends are unsustainable.
If this were a bubble, there are some stocks I wouldn’t want to own. Here are two of the most dangerous ones.
Recent bubble fears have since become even stronger. oraclesan’s (NYSE:ORCL) Latest earnings report. Although sales and profits have increased, the company has doubled its spending on AI and borrowed heavily to finance it. Capital spending in the latest quarter rose 200% from a year ago and exceeded Wall Street expectations by 50%. Management said it plans approximately $50 billion in capital spending in fiscal 2026, a significant increase from the $35 billion it previously expected.
Oracle does not have the cash flow to fund such an increase without relying heavily on the debt markets. The company raised $18 billion in September in the largest bond sale in tech industry history, and is targeting even more money next year. While the company itself maintains an investment-grade credit rating, the yield on its corporate bonds has fallen into junk-bond territory.
The price of Oracle’s five-year credit default swaps (essentially insurance in case the company defaults on its debt payments) has tripled in recent months and is now trading at levels not seen on Wall Street since the global financial crisis.
This is primarily because Oracle is actively borrowing to serve one customer: OpenAI. The creators of ChatGPT have committed to spending $300 billion over the next five years on Oracle’s services.
This is a surprising number for a company, although in my opinion profitability is still very low and the competitive moat is a small trend at this point. OpenAI is still burning cash, and its annual revenue is about one-fifth of what it has promised to spend with Oracle each year. The reality is that OpenAI will need to continue to raise unprecedented amounts of funding to pay its bills.
While being an AI data center operator coreweave (NASDAQ:CRWV) Revenue has tripled in the past year, but that growth has been financed by a large amount of expensive debt.
Including lease obligations, Coreweave has approximately $15 billion in debt, nearly four times its total revenue over the past 12 months. And this is not cheap financing. The company paid $311 million last quarter just to cover interest on its debt. Up nearly 200% year-over-year, interest expense is now more than a fifth of total revenue and about six times gross profit.
And like Oracle, CoreWeave has unbearable customer concentration. Almost all of its revenue comes from just a handful of customers, including: microsoft and other hyperscalers.
Image source: Getty Images.
If the AI bubble truly bursts, the implications for CoreWeave will be existential. But for the company to fall into a serious crisis, a full-scale bankruptcy would be necessary. The company’s main customers are also its competitors, and unless AI demand continues to grow so rapidly that hyperscalers can’t meet it with their own cloud infrastructure, Microsoft and its peers will likely prefer to bring more workloads in-house and cut out the intermediary, CoreWeave.
And while the company has some protection in the form of its $6.3 billion Nvidia backstop contract, that cushion won’t be enough to sustain itself if demand for AI processing power cools significantly.
These are just two of the many stocks that could burst if the AI bubble bursts. Nevius You will be depressed as well. So do many AI hardware providers. super microcomputer, It also includes a number of startups directly or indirectly related to AI that are trading at incredible valuations despite having little or no revenue, such as specialists in small modular nuclear reactors. Oklo And the pure play of quantum computing righetti computing and D Wave Quantum.
While no one can say for sure whether the AI sector is truly in a bubble yet, even the most confident bulls cannot deny that the scale of spending in this space is unprecedented and the excitement surrounding AI mirrors that of past bubbles.
If this is a bubble, just like in past bubbles, some companies will not only survive after the bubble bursts, but also thrive afterward. CoreWeave and Oracle are not among them.
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Johnny Rice has no position in any stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Oracle. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
“Prediction: These stocks will collapse when the AI bubble bursts in 2026” was originally published by The Motley Fool
