Why Oracle keeps sparking AI-bubble fears

Oracle keeps making investors nervous. Not just about the company itself, but about Big Tech's enormous bet on AI that has been the engine of our economic growth and the bull market. Why it matters:  With so much money at stake, any sign of a delay in AI profits raises the risk that some players may never get there.Driving the news:  Oracle's stock, already in a deep slump, tumbled Wednesday morning after the Financial Times reported that Blue Owl Capital, one of the biggest backers of the AI boom, walked away from talks with Oracle over investing in a planned data center in Michigan.Oracle told Bloomberg that its investment discussions over the data center were "on schedule," but that they did not involve Blue Owl.Blue Owl was concerned over possible delays, and also didn't like the existing lease terms and debt terms, a person familiar with the matter told Axios' Dan Primack.What they're saying: These are "the clanging bells," Paul Kedrosky, a venture capitalist and writer who has warned about an AI bubble, tells Axios.Blue Owl's apparent reassessment represents "a broader repricing of risk" that Kedrosky says will ripple through to other players. State of play: The tech giants that dominate the stock market are set to spend an estimated $700 billion on AI, but that money is going toward infrastructure, not application.They're paying up for data centers and chips — the guts that power AI before they have the applications that will make them money. If you draw a parallel to the 19th century railroad boom, they're building the rails before they have the trains on the tracks. And Oracle's data center in Michigan, which is part of the Stargate project with OpenAI, may still get delayed: Local officials tell Axios they're not willing to fast-track approvals for projects that deserve scrutiny.Between the lines: If we pretend the top tech companies are a friend group, Oracle and CoreWeave, another data center company, were the ones taking on credit card debt to keep up with the spending habits of their richer peers, with a promise of a cash windfall from their new bestie, OpenAI."Microsoft, Amazon, Google— that's who you want to be right now, because they're in charge," Gil Luria, an analyst at D.A. Davidson, tells Axios. Yes, but: Investors becoming more skeptical about Oracle and CoreWeave is actually a good thing, Luria says. The market is becoming more rational, he contends, with these "incremental players that were engaged in risky behavior are now paying the price.""The bubble was always Oracle and CoreWeave and to some extent OpenAI…and it's deflating."Oracle shares ended 5.4% lower on Wednesday; CoreWeave fell 7.1%. Tech was broadly lower, dragging down the Nasdaq 1.8%.The bottom line: Any hint that returns on all this AI investment could be delayed is scaring investors.And, according to Kedrosky, they should be scared.