The Golden Handcuffs of the AI Race: Why Oracle Has Become the Market’s Poster Child for Bubble Fears
The euphoria surrounding the artificial intelligence boom has hit its first major speed bump, and the unlikely company standing at the center of the turbulence is Oracle. Once a market darling, its massive, debt-fueled bet on AI infrastructure has transformed it into what many analysts now call the “poster child” for the industry’s bubble fears.
The company, helmed by cofounder Larry Ellison, has made an unprecedented gamble: positioning its Oracle Cloud Infrastructure (OCI) as the neutral backbone for the world’s most demanding AI workloads. This bold strategy has secured high-profile partners, including a reported $300 billion agreement with OpenAI for computing power, which sent the stock soaring earlier this year.
However, the market’s honeymoon ended abruptly in December 2025. Following its Q2 fiscal year 2026 earnings report, Oracle’s shares plummeted by nearly 40 percent from their peak, dragging down other AI-exposed stocks in the process. The immediate cause was a revenue miss combined with an eye-watering hike in capital expenditure, pushing its fiscal year 2026 capex forecast to as high as $50 billion.
This aggressive spending is where the narrative shifts from innovation to risk. The primary concern is simple: The enormous cost of building out its AI-ready data centers is being financed with debt, unlike competitors such as Amazon, Microsoft, and Google, which use their massive, existing cash flows.
For investors, this debt-fueled race to build capacity is an uncomfortable echo of past speculative booms. Oracle’s net debt reached approximately $124 billion in late 2025, and this leveraging up of the AI trade has pushed the cost of insuring its bonds to levels not seen in over a decade. The question hanging over the market is whether the revenue from its massive contract backlog, known as Remaining Performance Obligations, will materialize fast enough to cover the staggering cost of building the required data centers.
The fear intensified recently amid rumors of delays on some data center completion dates, specifically those tied to its relationship with OpenAI, though Oracle has stated that all milestones remain on track. Furthermore, reports that a major investment firm walked away from financing a planned Michigan data center due to concerns over possible delays and debt terms added fuel to the fire.
Yet, the bull case for Oracle remains compelling. Proponents argue that its differentiation as a “neutral” cloud provider—one that does not compete directly with its AI clients on their application business—makes it an essential long-term partner. While the company’s cloud infrastructure (OCI) revenue is seeing explosive growth, its stock decline underscores a crucial inflection point in the broader market: Investors are no longer rewarding mere aspiration. They are now demanding concrete proof that the enormous financial promises of the AI revolution can be converted into viable, debt-sustainable returns.