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Comment by rhdunn | Hacker News Reader

Listening to Ed Zitron on various podcasts, there are several issues with Oracle stocks:

1. they are one place above junk;

2. they are being treated as effectively junk;

3. if they get classified as junk, any pension portfolios holding Oracle stock must sell as they can't hold junk stocks.

If that happens then there will be a cascade of effects. Not just in the AI/datacentre sector but elsewhere, as Larry Ellison holds a stake in Paramount/helped finance the Paramount/WB merger.

[1] https://www.youtube.com/watch?v=rHaPfdnRoZ4 -- Mostly Economics Podcast #55: Who pays when the AI bubble bursts with Ed Zitron (12:36 - 23:53)

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Oracle's force majeure notice on a data centre build-out is not helping, I am sure.

(Can't remember, is it this Texas one?)

ETA: This whole Oracle bit is really the area of Zitron's predictions that is the least contentious: he called things, they are happening.

The big question is to what extent this is a harbinger of bad things. In a less crazy market where the value of enterprise-software-backed consultancy is stable or growing, you can imagine people lining up to bite off chunks from the carcass of a failed Oracle. But is the value of enterprise software even stable? Aren't many of the possible buyers also overextending themselves?

ETA 2: No, the potential force majeure is about a project in New Mexico, apparently

The longer a clearly deteriorating credit like Oracle remains nominally investment grade, the worse the selloff eventually becomes. It’d be a false economy to try to drag it out, especially when investment grade institutions are already pricing Oracle at crossover and preparing to get the hell out of dodge.

>3. if they get classified as junk, any pension portfolios holding Oracle stock must sell as they can't hold junk stocks.

Wouldn't hedge funds or PE recognize this arbitrage opportunity and eat this up, making this a non-issue? Vastly simplifying this: suppose "junk bond" means the chance of default is greater or equal to 10%. Of course it's bad if the risk of oracle going bankrupt edges up from 9% to 10.1%, but we shouldn't expect pandemonium from the 10% cliff edge, because there's plenty to be made by selling all the bonds that pension funds are obligated to sell, because now they have higher yields (yields move inverse to bond prices).

Why aren't the PE firms buying this debt right now though, before Oracle is downgraded? Isn't that a better purchase?

(Sincere, not rhetorical questions)

Because assuming the premise is true, there will be a dip in bond prices (ie. higher yields) when oracle gets downgraded, because pension funds or whatever have to dump their holdings. You buy the dip, not at the top.

Because the general consensus at this point appears to be that the notes will fail. You wouldn’t buy a loan if you thought it wasn’t going to be repaid.

> You wouldn’t buy a loan if you thought it wasn’t going to be repaid.

Eh, people do weird things all the time.

Also, there is often extreme information asymmetry.

Ehhhh?

I guess, maybe, but perhaps the risk that GP is commenting on is that it could be it's own form of Juicing.

I do sincerely doubt, even with the big shifts that AI enables to have companies 'move away' from Oracle, that Oracle will default.

On the other hand, There's still an elevated chance of decline.

IOW, Those stocks might move from pension type plans to different baskets as a result, however there is a non-negligible risk of some (not total!) loss in the 5-10 year term.

Will add, I would -hope- that the same pension rules around selling questionable stocks, would also have rules limiting what level of exploitation is possible.

s/stock/bonds

Equity shares do not have ratings, bonds have ratings. Everything else is correct, if their bond ratings slip one more level they will be rated junk which may force some holders to liquidate if they’re not allowed to hold junk bonds.

You could have made a lot of money betting against Ed Zitron over the past few years. He has predicted 12 of the last 0 AI market crashes.

Of course past performance is no guarantee of future results, as they say.

tbf he only needs to be right once, and at the moment the question of profitability of these frontier companies is still open

I think it's only a matter of time, like the build-up to the financial crash in 2008 or the dot-com bubble. There's currently a huge amount of money being bet on the big AI tech companies without any real sense of return. And the companies like Oracle that are funding data centre build-out are sitting on unused GPU stock.

Recently, the Australian AI firm failed to secure an IPO [1], [2].

OpenAI is looking to go for an IPO despite shaky revenue [3], [4], [5], resulting in a stock drop for companies like Oracle invested in OpenAI [6].

Anthropic is in a similar situation: looking to IPO despite shaky finances [7], [8], [9].

The companies involved are all investing in each other and trading money between them leading to circular investment [10].

[1] https://www.wsj.com/finance/firmus-ipo-ai-trade-f490c240

[2] https://www.abc.net.au/news/2026-10-10/how-firmus-the-bigges...

[3] https://techcrunch.com/2026/10/08/openais-revenue-is-reporte...

[4] https://www.inc.com/chris-morris/what-openais-leaked-financi...

[5] https://futurism.com/future-society/ai-financial-bubble-open...

[6] https://www.cnbc.com/2026/10/08/open-ai-revenue-nvidia-oracl...

[7] https://www.investors.com/news/technology/anthropic-ipo-fili...

[8] https://www.newconstructs.com/wp-content/uploads/2026/10/Ant...

[9] https://www.tradingkey.com/analysis/stocks/us-stocks/2622154...

[10] https://graceblakeley.substack.com/p/the-ai-circular-economy

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