Tech's $96B AI Gamble: Debt Frenzy Risks a New Bubble

The tech sector's AI infrastructure boom has triggered a debt surge of nearly $96 billion, as companies and investors bet on artificial intelligence's transformative potential. OpenAI, the San Francisco-based AI research lab, has emerged as a central figure in this financial frenzy, with partners like Oracle, CoreWeave, and Elon Musk's xAI securing massive loans and funding rounds to scale data centers and cloud capabilities. The trend underscores a high-stakes gamble on AI's future, even as analysts warn of overleveraging and market volatility.

Oracle, a key player in cloud infrastructure, has drawn scrutiny for its reliance on OpenAI to bolster its revenue backlog. The company's recent earnings report revealed that OpenAI accounted for nearly all of Oracle's reported increase in remaining performance obligations (RPO), a metric that measures long-term contract value. DA Davidson, an investment firm, cut Oracle's stock price target from $300 to $200, citing concerns that OpenAI's "trillion-dollar commitments to other providers" have turned Oracle into "a pawn in the grand game of fake it 'till you make it". Oracle's shares have since fallen 9.17% in a week, reflecting broader market anxiety about the sustainability of its AI-driven growth.

The debt expansion is not limited to corporate giants. CoreWeave, a data center provider, secured a $7.5 billion credit facility from Blackstone and Magnetar in May 2024, a move that highlights the role of private credit in fueling AI infrastructure. Morgan Stanley estimates private credit markets could supply over half of the $1.5 trillion needed for data center construction through 2028. However, CoreWeave's rapid growth has come at a cost: while third-quarter revenue surged 130% to $1.36 billion, operating income nearly halved, and interest expenses tripled. Critics argue the company's reliance on financial engineering mirrors the collateralized debt obligations (CDOs) that contributed to the 2008 financial crisis, with Magnetar-a key player in both scenarios-drawing particular attention.

Meanwhile, OpenAI's partners are diversifying their funding strategies. Elon Musk's xAI, which develops the Grok chatbot, is reportedly closing a $15 billion funding round at a $230 billion valuation, with proceeds earmarked for GPU procurement according to reports. This follows OpenAI's own $40 billion private raise in early 2025, valuing the lab at $300 billion. Such fundraising prowess has allowed OpenAI to sidestep an IPO, relying instead on private capital from Microsoft and SoftBank. Microsoft, in particular, benefits as a major investor and partner, leveraging OpenAI's AI models to enhance its Azure cloud platform.

Analysts caution that the current debt binge could mirror past speculative bubbles. Symbotic, a robotics company with a $22.5 billion backlog tied to Walmart and SoftBank, recently reported a 30% year-on-year revenue growth but still operates at a loss. Its experience underscores the challenge of balancing rapid expansion with profitability in AI-dependent industries.

As the AI sector continues to attract record debt, the long-term viability of these investments remains uncertain. While companies like Oracle and CoreWeave argue that AI infrastructure is critical to future competitiveness, critics warn that the market may be overestimating the immediate returns from AI-driven projects. For now, the $96 billion debt surge reflects a collective bet on AI's potential-and a willingness to take on significant financial risk to secure a place in the next technological frontier.