Oracle keeps making investors nervous, not just about the company itself, but about the enormous bet Big Tech has made 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 stock, already in a deep slump, tumbled yesterday 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 around 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 disliked the existing lease terms and debt terms, a person familiar with the matter tells Axios Pro Rata writer 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.

• The apparent reassessment by Blue Owl 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 are 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, the tech giants are building the rails before they have the trains on the tracks.
• The Oracle data center in Michigan, which is part of the Stargate project with OpenAI, may still get delayed. Local officials tell Axios they are 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, are 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 are in charge," Gil Luria, analyst at D.A. Davidson, tells Axios.

Reality check: Investors becoming more skeptical about Oracle and CoreWeave is actually a good thing, Luria says.

• The market is becoming more rational, he contends: "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," he adds, "and it's deflating" as investors grow skeptical.
• Oracle shares ended 5.4% lower yesterday, while 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.

Bond yields for the largest Big Tech debt borrowers have climbed and trading in credit default swaps has surged as investors reassess the risks behind the AI boom.

Why it matters: The activity may actually reflect traders hedging so they can buy even more AI-linked debt, a sign of froth, not fear.

What they're saying: "People haven't become nervous. The current signal is they are hedging exposure so they can buy more," Kedrosky tells Axios.

• Investors who want to hold Big Tech bonds — especially those of firms issuing debt to fund data-center expansion — often hedge by purchasing credit default swaps, he notes.
• "It's inevitable that as more debt is issued, there's more activity in CDS. People think it's because (investors) are worried about the solvency of Oracle. It's actually the opposite. It's a way of allowing them to buy more debt. That's actually a sign that people haven't become nervous."

Catch up quick: While credit default swaps — derivatives on the possibility of a default in the underlying debt — can be used to express bearish, speculative views, they are also a tool for banks, insurers and asset managers to neutralize risk and reduce regulatory capital charges.

• It means that rising CDS volumes do not automatically signal mounting default concerns. They may simply reflect more debt being bought — and hedged — as investors lean further into AI infrastructure exposure.

By the numbers: Trading volumes of credit default swaps surged by 90% since early September, per data from MooMoo, an AI-powered investing platform.

• The latest Oracle debt issuance was five times oversubscribed.
• Following its recent earnings results, Oracle credit spreads widened by about 30 basis points on average across the curve, and its five-year CDS reached peaks not seen in almost 20 years, according to JPMorgan.
• "We expect persistent new issue risk — not only from Oracle but also from higher-quality AI issuers more broadly — along with AI bubble concerns, to weigh on spreads in 2026," JPMorgan Chase credit analyst Erica Spear says in a note.

Between the lines: The surge in CDS trading could mean investors are not actually preparing for the AI bubble to burst. Instead, they are preparing to double down, but want to hedge their bets just in case.

What to watch: Whether CDS spreads widen much more sharply.

• Kredosky is monitoring for triple-digit moves, which could indicate that investors are not just trying to neutralize risk, but are actively pricing in rising odds of default. And that would mark a turn from froth to fear.

Technology stocks were hammered yesterday, sending the S&P 500 below its 50-day moving average, a key technical level.

The big picture: The hiccup over the Oracle data center financing appeared to drive the selling, indicating just how much weight investors place on every AI headline right now.

Reality check: The number of stocks advancing versus the number of those declining continues to grind higher, indicative of a broadening in the market.

• More names are advancing even as the broad indexes are under pressure.
• That could be a sign of a healthy rotation out of the high-flying tech names that have defined this bull market and into some value-oriented corners of the market.

💭 Thought bubble: Breadth is great! But money managers may prefer gains in the near-term, since their performance will be judged based on where these stocks end up at the end of the year.