Oracle’s all-out push into artificial intelligence infrastructure has plunged its debt into junk bond territory.
While CoreWeave’s revenue is growing at lightning speed, so has its massive debt load.
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There’s a lot of talk about the artificial intelligence (AI) bubble. The echoes of 2000 are hard to ignore, with valuations reaching record highs and companies spending eye-watering sums on infrastructure, The race to build as many large AI data centers as possible. While we may not be in a bubble, and indeed “this time is different,” it is not unreasonable to think that current trends are unsustainable.
If this is a bubble, then I don’t want to own some stocks. Here are two of the most dangerous.
Anxiety intensifies over latest round of bubbles Oracleof (NYSE:ORCL) Latest earnings report. As revenue and profits grow, the company is doubling down on AI spending and borrowing heavily to fund it. Capital spending in the latest quarter was up 200% year over year and 50% higher than Wall Street forecasts. Management said it currently expects to invest approximately $50 billion in capital expenditures in fiscal 2026, a significant increase from the previous forecast of $35 billion.
Oracle doesn’t have the cash flow to fund such an expansion without relying heavily on debt markets. In September, the company raised $18 billion in one of the largest debt offerings in the history of the technology industry, and is targeting a higher amount in the coming year. While the company itself has maintained an investment-grade credit rating, its bond yields have slipped into junk-bond territory.
Oracle’s five-year credit default swaps – essentially insurance against the company’s failure to repay its debt – have tripled in price in recent months and are currently trading at levels not seen on Wall Street since the global financial crisis.
This is largely because Oracle has borrowed so aggressively primarily to serve one customer: OpenAI. The creators of ChatGPT have pledged to spend $300 billion on Oracle services over the next five years.
That’s an eye-popping number for a company that remains severely unprofitable, and whose competitive moat has become more like a creek at this point in my opinion. OpenAI is still burning cash, with annualized revenue roughly one-fifth of what it spends annually on its commitment to Oracle. The reality is that OpenAI will need to continue raising unprecedented amounts of money to pay its bills.
And AI data center operators core weaving (NASDAQ: CRWV) The company’s revenue has tripled over the past year, and that growth has been financed with a mountain of expensive debt.
Including lease obligations, CoreWeave has about $15 billion in debt, nearly four times its trailing 12-month total revenue. This is not cheap financing. The company paid $311 million last quarter just to pay interest on its debt. Its interest expense has increased by nearly 200% year-on-year and now accounts for more than one-fifth of total revenue and approximately six times gross profit.
Like Oracle, CoreWeave’s customer concentration is unsustainable. Nearly all revenue comes from a handful of customers, including Microsoft and other very large scales.
If the AI bubble does burst, the impact on CoreWeave will be life-or-death. But a company doesn’t need to completely fail to be in serious trouble. Its main customers are also its competitors, and unless AI demand continues to grow at such a rate that hyperscalers still can’t meet it with their own cloud infrastructure, Microsoft and its peers may prefer to bring more workloads in-house and eliminate the middleman CoreWeave.
While the company does have some protection in the form of a $6.3 billion Nvidia support deal, that cushion won’t be enough to sustain it if demand for AI processing power cools significantly.
These are just two of the many stocks that could collapse if the AI bubble bursts – other new cloud providers, such as Nebius It will also plummet. Many AI hardware providers will also like ultra-microcomputer, and many startups related directly or indirectly to AI that trade at mind-boggling valuations despite generating little or no revenue, such as the small modular nuclear reactor specialist Oklo and the pure play of quantum computing Righetti Calculation and D wave quantum.
No one can say for certain yet whether the AI industry is actually in a bubble, but even the most confident bulls can’t deny that the scale of spending in the space is unprecedented, and that the enthusiasm surrounding AI mirrors past bubbles.
If this is a bubble, as bubbles have been in the past, some companies will not only survive but thrive after the bubble bursts. CoreWeave and Oracle will not be included.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool owns and recommends Microsoft and Oracle. The Motley Fool recommends the following options: Long January 2026 Microsoft calls at $395 and short January 2026 Microsoft calls at $405. The Motley Fool has a disclosure policy.
Prediction: If the AI Bubble Bursts in 2026, These Stocks Will Crash Originally Posted by The Motley Fool
