Oracle’s all-out push into AI infrastructure has pushed its debt into junk bond territory.
While CoreWeave’s revenue is growing at breakneck speed, so is its substantial debt load.
10 Stocks We Like More Than CoreWeave ›
There is a lot of talk about an artificial intelligence (AI) bubble. The echoes of 2000 are hard to ignore, with valuations hitting record highs and companies spending huge sums on infrastructure, race to build as many colossal AI data centers as possible. While we may not be in a bubble and it may truly be “different this time,” it is not unreasonable to see current trends as unsustainable.
If this is a bubble, there are some stocks I wouldn’t want to own. Here are two of the riskiest.
The latest bubble anxiety attack intensified after Oraclehis (NYSE: ORCL) the most recent income report. While revenue and profits have grown, the company is doubling down on AI spending and borrowing heavily to fund it. Capital spending last quarter rose 200% year over year and was 50% higher than Wall Street expected. Management said it now expects to invest about $50 billion in capex in fiscal 2026, a massive increase from the $35 billion it had previously projected.
Oracle doesn’t have the cash flow to fund this kind of build without leaning heavily on the debt markets. In September, the company raised $18 billion in one of the largest bond sales in tech history, and is aiming for even bigger amounts next year. Although 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 failing to repay its debt — have tripled in price in recent months and are now trading at levels not seen on Wall Street since the global financial crisis.
That’s largely because Oracle is borrowing so aggressively primarily to serve a single customer: OpenAI. The creator of ChatGPT has pledged to spend $300 billion over the next five years on Oracle services.
That’s an amazing number for a company that remains deeply unprofitable and whose competitive moat, in my opinion, has become more of a trickle at this point. OpenAI is still burning cash, and its annual revenue is about a fifth of what it committed to spending with Oracle each year. The reality is that OpenAI will need to continue to raise unprecedented amounts of capital to pay its bills.
While data center operator AI CoreWeave (NASDAQ: CRWV) has tripled its revenue in the past year, with that growth being financed with an enormous amount of expensive debt.
Including its lease obligations, CoreWeave carries about $15 billion in debt — nearly four times its total revenue over the last 12 months. And this is not cheap financing. The company paid $311 million last quarter just to cover the interest on its debt. Up nearly 200% year-over-year, interest expense now accounts for more than a fifth of total revenue and about six times gross profit.
And like Oracle, CoreWeave has an unbearable degree of customer focus. Almost all of its revenue comes from just a handful of clients, including Microsoft and other hyperscalers.
Image source: Getty Images.
If the AI bubble really does burst, the implications for CoreWeave would be existential. But it wouldn’t take a total collapse for the company to be in serious trouble. Its key customers are also its competitors, and unless demand for AI continues to expand at such a rapid pace that hyperscalers are left unable to satisfy their own cloud infrastructure, Microsoft and its peers will likely prefer to bring more of the workloads in-house and cut out the middleman, CoreWeave.
And while the company has some protection in the form of Nvidia’s $6.3 billion protection agreement, 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 neocloud providers such as I won’t would also throw themselves. So would many of the AI hardware vendors Super Micro Computer, as well as a number of start-ups directly or indirectly related to AI that are trading at incredible valuations despite little or no revenue, such as the specialist in small modular nuclear reactors. Okay, hey and quantum computing pure games Give up the calculation and D-Wave Quantum.
No one can yet say for sure whether the AI sector is truly 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 fervor surrounding AI mirrors that of past bubbles.
If this is a bubble, as with past bubbles, there will be companies that will not only survive its burst, but thrive afterward. CoreWeave and Oracle will not be among them.
Before buying stock in CoreWeave, consider the following:
The Motley Fool Stock Advisor the analyst team has just identified what they think they are 10 best stocks for investors to buy now…and CoreWeave wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you would have $474,578!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $1,141,628!*
Now, it’s worth noting Stock advisor the total average return is 955% — a market-crushing outperformance compared to 196% for the S&P 500. Don’t miss the latest top 10 list, available with Stock advisorand join an investor community created by individual investors for individual investors.
See the 10 stocks »
*The stock advisor returns starting January 18, 2026.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Oracle. The Motley Fool recommends the following options: long $395 January 2026 Microsoft calls and short $405 January 2026 Microsoft calls. The Motley Fool has a disclosure policy.
Prediction: These Stocks Will Crash If AI Bubble Pops in 2026 was originally published by The Motley Fool
