When "create more wealth before the bubble bursts" is the bull case

[An earlier draft of this went up for a little while Saturday. Apologies if you were one of the non-bots who saw it.] 

Not a finance guy, so I’m not sure how much to make of this, but the major players in AI are pulling all sorts of unusual and often questionable financial moves—such as suppliers finding ways to channel money to the companies buying their products. Given that, by most estimates, the AI bubble is now far larger than the dot-com bubble, it seems like this is a big deal.

1 big thing: A big sign of an AI bubble starts to appear

    Madison Mills

Debt is the canary in the coal mine for market bubbles. Housing debt fueled the global financial crisis. Corporate debt led to dotcom bust. Now, the tech companies driving today's bull market are quietly levering up, sometimes through private lenders that make their debt less visible to shareholders.

Why it matters: That debt — and how it is getting structured — is "almost an acknowledgement that this is getting out of hand," Dario Perkins, managing director of global macro at TS Lombard, tells Axios.

...

Zoom out: Big Tech is turning to private debt markets and special purpose vehicles. The catch? That kind of borrowing doesn't have to be reflected on balance sheets.

• "SPVs mean companies like Meta do not need to show the debt as their debt," Perkins writes in a note to clients. He likens today's financing tactics to the subprime era, when firms shifted risk off their books to reassure investors.
• Meta is raising $29 billion via private capital for its AI data center buildout.
• Other tech giants are tapping the public market for debt. Oracle recently issued $18 billion in debt to fund its AI and infrastructure expansion.

Like I said, I'm not a finance guy and definitely not the person you'd want to guide you through these weeds, but the AI sector is filled with other curious and often worrisome arrangements that might be inflating revenue and masking sustainability issues. 

Yes, but: Plenty of strategists have reminded Axios of the old Keynesian adage that "the market can stay irrational longer than you can stay solvent."

• In other words, this tech-driven bull market could still have legs to create more wealth before the bubble bursts. Perkins, however, isn't convinced.
• "I wouldn't touch this stuff now," Perkins says, adding that comparing this market with the dotcom bubble, "we're much closer to 2000 than 1995."

The "market can remain irrational" line is highly significant if you're trying to time the market; it's not all that important if you're concerned with the potential impact of the implosion. 

I'd also argue that bubbles don't create wealth; they create the temporary illusion of wealth.  

Between the lines: Why are tech companies spending this much to win the AI race if the bubble risk is so prescient?

• The market is rewarding them even if it "makes no economic sense to spend at this level because there's no way they can recoup the value of the capital spending," investor Paul Kedrosky explains on the Plain English podcast.
• Kedrosky is also watching how companies are moving financing off the balance sheet: "That for me is a reflection of not wanting the credit rating agencies to look at what they're spending."

So, the major players in the AI bubble are engaged in some possibly questionable and certainly opaque financial practices. How big a deal could that be?

 

Magnificent Seven surpass EU GDP: Is this a tech bubble warning?

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— Euronews (@euronews.com) October 3, 2025 at 11:09 PM