December 16, 2025 | Is the Trillion-Dollar AI Boom a House of Cards?

The AI House of Cards: Why Today’s AI Boom Could Unravel Fast

Wall Street is all-in on AI, with trillion-dollar expectations pushing tech stocks to extreme valuations. Oracle’s recent claim of a $523 billion cloud backlog – largely tied to AI infrastructure – perfectly captures the excitement. Big deals with OpenAI, Nvidia, and Meta sent shares soaring.

But behind the hype is a fragile setup that investors should understand: circular financing.

What Is Circular Financing – and Why It Matters

Circular financing happens when the same group of tech giants effectively fund each other’s growth. Oracle builds data centers for OpenAI. OpenAI relies on Nvidia chips. Microsoft  and Meta help fund OpenAI. Money moves around the same circle, creating the appearance of massive demand – even though little outside cash is entering the system.

On paper, revenues look strong. In reality, risk is quietly building. If one company stumbles, the entire loop can break.

Oracle Shows How Fast Things Can Turn

Oracle is a prime example. More than half of its cloud backlog – about $300 billion – is tied to OpenAI. That story pushed Oracle shares up 36% earlier this year.

Then reality hit.

• Capital spending surged to $12 billion per quarter
• Total debt climbed above $100 billion
• Revenue missed expectations
• Guidance was cut
• The stock fell 40%, wiping out roughly $360 billion in market value

Moody’s now says Oracle has its highest exposure to OpenAI and the weakest credit metrics among peers. Delays tied to OpenAI projects only add to the pressure.

OpenAI: The Center of the Risk

OpenAI sits at the heart of this entire ecosystem. It has committed roughly $300 billion to Oracle infrastructure – but its finances are stretched.

• Projected cash burn: $115 billion by 2029
• Annual losses expected to reach $14 billion by 2026
• Compute costs alone near $100 billion
• Expected 2026 revenue: just $30 billion

In simple terms, costs are rising far faster than profits. OpenAI’s survival depends on continuous funding in a market that’s becoming more cautious.

If One Falls, Others Follow

If OpenAI runs into trouble, the ripple effects could be severe:

• Oracle could lose a major chunk of future revenue and face debt stress
• Nvidia could see GPU demand weaken and margins compress
• Microsoft, with a $13 billion stake, could face large write-downs
• Amazon and Google wouldn’t be immune as AI spending slows
• Corporate bond markets could tighten under $1+ trillion in Big Tech debt

AI-focused stocks now make up roughly 30% of the S&P 500. Even a small pullback could shake the entire market.

The Bottom Line for Investors

The AI boom is real – but it’s being built on heavy debt and tightly linked balance sheets. Analysts at major banks are already warning that AI spending is becoming too circular, a trait seen in past market bubbles.

For retail investors, the lesson is simple:

• Follow the cash, not just the headlines
• Watch debt levels and capital spending
• Be cautious when growth depends on everyone propping each other up

AI will still create long-term winners – but in a system built on circular money flows, one break in the chain could bring the whole structure down.

Martin Straith December 16th, 2025

Posted In: The Trend Letter

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