The Biggest Risk to Your Portfolio Isn't Missing AI -- It's Holding These 2 Stocks When the Hype Fades

CoreWeave - CoreWeave is highly leveraged, with a significant role in the AI data center buildout, and is expected to nearly triple its revenue in 2024, but this growth is driven by substantial debt [3][6] - The company has over $10 billion in long-term debt, requiring high-interest borrowing, and it pays six times its gross profit to service this debt [6] - CoreWeave's capital expenditures have exceeded its revenue for each quarter, with capex more than double its sales and six times its operating cash flow over the last 12 months [5][6] Oracle - Oracle is also relying on leverage for growth, particularly through its all-in AI strategy, which involves significant resource expenditure to meet the demands of AI customers like OpenAI [7][10] - The company has issued tens of billions of dollars in bonds this year, with credit default swaps reaching their highest levels since the 2007-08 financial crisis, indicating increased market risk [9] - Oracle's debt is primarily funding data centers for OpenAI, which is committed to paying Oracle at least $300 billion over five years, despite OpenAI's low annual sales and ongoing losses [10][11] Industry Outlook - Both CoreWeave and Oracle are seen as risky investments due to their heavy reliance on continued AI demand and the accumulation of expensive debt [12][13] - The current AI hype is compared to the dot-com bubble of the 1990s, suggesting that if the hype fades, these companies may struggle to thrive [12][13]