The murmurs persist, of course. A swelling, an effervescence. They call it an ‘AI bubble,’ a term as imprecise and unsettling as a misfiled bureaucratic form. One observes the valuations, ascending to altitudes previously reserved for theoretical constructs, and the relentless expenditure on infrastructure—vast data centers sprouting like concrete fungi. It is, naturally, declared ‘different this time.’ A comforting fiction. The ledger, however, suggests a certain… instability. A precarious balance maintained by increasingly complex and opaque mechanisms.
Should this effervescence subside, certain equities will find themselves… exposed. One identifies two, not as predictions of failure, but as observations of inherent structural vulnerabilities. They are not necessarily destined to collapse, merely… to experience a more acute manifestation of the underlying condition.
Oracle: The Dependency
The latest earnings report from Oracle—a document of considerable length and meticulously detailed accounting—offered a glimpse into this condition. Revenue and profits, yes, are reported as ‘up.’ But this is merely the surface. The company is doubling its commitment to artificial intelligence, a pursuit funded not by organic growth, but by an escalating reliance on debt. Capital expenditures have increased by two hundred percent, exceeding even the most optimistic projections. The projected expenditure for the fiscal year 2026—fifty billion dollars—represents a significant escalation, a commitment made with a curious lack of… prudence.
Oracle, it appears, lacks the internal cash flow to sustain this level of investment. The company has therefore resorted to the debt markets, securing eighteen billion dollars in a bond sale—a transaction of considerable magnitude. Further issuances are anticipated. While maintaining an investment-grade rating, the yields on these bonds have begun to… drift. A subtle indication of underlying anxiety.
The Leveraged Existence
CoreWeave, an operator of AI data centers, has tripled its revenue. A commendable achievement, one might think. However, this growth is financed by an extraordinary amount of debt. The company carries approximately fifteen billion dollars of debt—nearly four times its total revenue over the last twelve months. A precarious ratio, maintained by increasingly expensive financing.
The interest expense alone—three hundred and eleven million dollars last quarter—now constitutes more than a fifth of its total revenue and six times its gross profit. A self-perpetuating cycle of borrowing to service existing debt. The company’s existence is, in essence, leveraged to an unsustainable degree.
Furthermore, CoreWeave suffers from an acute degree of customer concentration. Nearly all of its revenues originate from a handful of clients, including Microsoft and other hyperscalers. A vulnerability that is… self-evident.
Should the AI effervescence subside, the implications for CoreWeave would be… existential. But even a moderate cooling of demand could prove fatal. Its key customers are also its competitors. Unless AI demand continues to expand at its current rate—an unlikely prospect—Microsoft and its peers are likely to internalize more of the workload, eliminating the need for intermediaries like CoreWeave. A logical outcome, viewed from a purely economic perspective.
The company does have a backstop agreement with Nvidia, amounting to six point three billion dollars. A temporary reprieve, perhaps. But it will not be sufficient to sustain CoreWeave if demand for AI processing power meaningfully declines.
Other Observations
These are merely two examples. Other ‘neocloud’ providers, such as Nebius, would likely suffer a similar fate. Hardware providers, like Super Micro Computer, would also be affected. And a host of AI start-ups—Oklo, Rigetti Computing, D-Wave Quantum—trading at inflated valuations despite generating little or no revenue, would be… reassessed.
Whether the AI sector is truly a bubble remains to be seen. Even the most ardent proponents cannot deny the scale of spending—or the echoes of past effervescences. If this is indeed a bubble, there will be survivors. CoreWeave and Oracle, however, are unlikely to be among them. They are, in a sense, already… accounted for.
Read More
- 39th Developer Notes: 2.5th Anniversary Update
- Gold Rate Forecast
- Here’s Whats Inside the Nearly $1 Million Golden Globes Gift Bag
- The Hidden Treasure in AI Stocks: Alphabet
- TV Pilots Rejected by Networks
- The Labyrinth of JBND: Peterson’s $32M Gambit
- 20 Must-See European Movies That Will Leave You Breathless
- The Worst Black A-List Hollywood Actors
- You Should Not Let Your Kids Watch These Cartoons
- Mendon Capital’s Quiet Move on FB Financial
2026-01-18 11:43