Capital expenditures are exploding but profits are not in sight. Will the AI investment frenzy become the next financial crisis?

OpenAI's request for federal loan guarantees has raised alarms, with the capital circulation model of the AI industry bearing startling similarities to the 2008 subprime mortgage crisis. How should investors respond to the potential risks of a tech bubble? (Background: AMD allows OpenAI to 'acquire 10%' of its shares, with stock prices soaring by 24%, fully declaring war on Nvidia Cuda?) (Supplementary background: Sora 2 is making a strong debut! OpenAI aims to reclaim the throne of live video models, with its eponymous iOS app launched targeting Tiktok) We are in an exciting era where the AI revolution is infiltrating every corner of life at an astonishing speed, promising a more efficient and intelligent future. However, a disturbing signal has recently emerged: the world's most prominent AI company, OpenAI, has publicly requested federal loan guarantees from the U.S. government to support its massive infrastructure expansion, potentially costing over 1 trillion dollars. This is not just an astronomical figure but a blatant warning. If the financial blueprint supporting this AI boom has a structure alarmingly similar to the 2008 financial storm that nearly destroyed the global economy, how should we view it? Despite the promising prospects of the AI industry and the potential of the technological revolution, recent markets have shown unsettling signals of financial pressure. The underlying structure of its capital operations bears striking similarities to several past financial crises, particularly the 2008 subprime mortgage crisis. This article will delve into the capital circulation, leverage operations, and risk transfer issues behind these warning signs, penetrating the market narrative to stress-test the financial structures supporting the current AI valuations. Ultimately, we will assess the nature of the risks, possible outcomes, and propose strategies for investors to cope. Warning signs emerge: Early warning signals centered around Oracle In the current wave of prosperity led by AI technology, market sentiment is generally optimistic, with tech giants' stock prices repeatedly reaching new highs. However, just as experienced miners bring canaries down to warn of toxic gases, in an apparently bright market, abnormal financial indicators of individual companies can often reveal the potential systemic risks of the entire industry, much like 'canaries in the coal mine.' The canary in the coal mine The established tech giant Oracle is making a high-stakes gamble. To challenge the dominance of Amazon, Microsoft, and Google in the AI data center arena, it is investing 100s of billions of dollars in expansion at an extremely high debt cost, including the 'StarGate' super data center project in collaboration with OpenAI. Its debt-to-equity ratio has reached an astonishing 500%, meaning its total debt is five times its net assets. In contrast, Amazon's debt-to-equity ratio is only 50%, and Microsoft's is even lower. In simple terms, Oracle has essentially wagered the entirety of the company's fortune and future value in this AI race. The debt levels of American tech giants This alarm is known as Credit Default Swap, CDS. The most critical signal recently is the insurance cost set for Oracle's potential 'debt default' fire: its CDS spread has surged to the highest point in years. We can think of CDS as a form of financial insurance: imagine your neighbor (Oracle) is stacking large amounts of flammable materials (mountains of debt) in their basement every day. You are very worried that their house might catch fire, possibly affecting you. So, you find an insurance company and pay out of your own pocket to buy fire insurance for your neighbor's house. This insurance contract in the financial world is the CDS, and the premium you pay is the price (spread) of the CDS. A surge in premiums means that the insurance company believes the risk of fire has sharply increased. This phenomenon conveys a clear message: the most top-notch and astute financial institutions in the market generally believe that Oracle's default risk is rising sharply, rooted in the 'mountains of debt' on its balance sheet. Oracle's debt alarm is like a crack on the surface; although small, it suggests that a violent movement is happening deep underground. What structural risks are hidden within this capital operation model driving the entire AI industry? Deep financial structure: The 'infinite money cycle' game among AI giants The financial pressure on a single company is just the tip of the iceberg. When we broaden our perspective from Oracle to the entire AI ecosystem, a deeper structural risk emerges. The real risk is rooted in a unique capital operation model among the AI industry giants, a financial game that seems capable of turning stone into gold but is, in reality, extremely fragile. This is the closed capital game known as the 'infinite money cycle,' which inflates revenue bubbles out of thin air, constructing a seemingly prosperous yet fragile financial system. To better understand this model, we can simplify it into a 'three friends starting a business' model: Step one: Chip giant Nvidia (Mr. A) invests 100 dollars into the AI star company OpenAI (Mr. B). Step two: OpenAI (Mr. B) immediately pays this 100 dollars in full to Oracle (Mr. C), nominally for purchasing its expensive cloud computing services. Step three: Upon receiving the 100 dollars, Oracle (Mr. C) quickly uses all of it to purchase powerful super chips from the initial investor, Nvidia (Mr. A). The infinite money game After this cycle, the 100 dollars is back in Nvidia's hands. However, although the funds are merely circulating internally, without any real purchases from external customers, all three companies' financial statements show that they 'magically' created 100 dollars in revenue each. This makes their financial reports exceptionally bright, strongly supporting their high stock prices and market valuations. The fatal flaw of this model lies in the fact that the entire game's foundation is not built on solid customer demand but entirely relies on the commitments between participants and the continually expanding credit. If any link in the cycle breaks—for example, Oracle cannot repay its loans due to excessive debt—the entire seemingly prosperous system could collapse in an instant. This closed capital cycle, which inflates revenue bubbles through internal transactions, is not a financial innovation; its structure bears striking similarities to the operational methods preceding certain historical financial crises, evoking memories of that storm that nearly destroyed the global economy. Echoes of history: The five striking similarities between the current AI financial structure and the 2008 subprime mortgage crisis The current financial phenomenon is not isolated. When we piece together Oracle's debt alarm with the capital cycle among AI giants, market observers who experienced the 2008 financial tsunami may feel a sense of 'deja vu.' The following systematically analyzes the five key commonalities between the current financial operations in the AI field and the core elements that led to the 2008 global financial crisis, revealing that history may be repeating itself in a new form. A comparison of the 2008 subprime crisis and the current AI bubble These five striking similarities paint a picture that is concerning…