The AI boom has become the single brightest spot in an otherwise sluggish global economy. Hyperscalers are spending upwards of $400 billion this year alone on data centers, and investors are desperate to own any piece of that growth.
Two names have ridden the wave especially hard: Oracle (NYSE:ORCL | ORCL Price Prediction) and Digital Realty Trust (NYSE:DLR). Oracle is positioning itself as the cloud backbone for frontier AI models through massive OpenAI contracts and a flood of new data-center debt. Digital Realty — the largest wholesale data-center landlord — is expanding racks as fast as power permits to house the GPUs driving the revolution. Both stocks are still widely recommended by Wall Street, yet Oracle is already down 41% from its 2025 peak, while Digital Realty has shed 21% from its high and 12% year-to-date.
Some investors are quietly heading for the exits. The rest may soon follow, because the infrastructure story that lifted these shares — and the market — is starting to crack at the foundation.
The Build-Out That Can’t Keep Up With Itself
Data-center construction is running at record pace, but power delivery is not. Amazon (NASDAQ:AMZN) has multiple “zombie” campuses in Oregon sitting dark because it can’t make grid connections. Northern Virginia, the world’s largest data-center market, faces multi-year delays for new substations.
Globally, the industry needs an additional 30 to 50 gigawatts (GW) of power by 2030, yet utilities are adding only single-digit gigawatts per year. Oracle and Digital Realty are among the most aggressive builders in exactly these constrained regions.
Oracle has issued $18 billion in new bonds this year to fund AI-optimized cloud regions. Its headline deal with OpenAI is a five-year, $300 billion commitment, but internal documents show Oracle lost $100 million in the most recent quarter on that contract alone because utilization is far below plan and depreciation is brutal. Leverage is now approaching 4× EBITDA — a level credit markets historically treat as speculative-grade territory.
Digital Realty carries $20 billion in debt against a portfolio that assumes perpetual strong leasing growth. Real estate investment trust (REIT) accounting lets it depreciate buildings over 30 to 40 years, but the GPUs inside those buildings are obsolete in 18 to 36 months. If demand growth slows even modestly, the mismatch between long-lived real estate and short-lived technology turns today’s premium valuation into tomorrow’s writedown.
Why These Two Are Especially Exposed
Microsoft’s (NASDAQ:MSFT) Satya Nadella recently warned that AI’s power hunger could lose “social permission” and that “everyone” will feel the pain. That is true, but not everyone is equally levered to the physical bottlenecks. Oracle and Digital Realty have little of the cash-hoard cushion that protects Microsoft, Amazon, or Google. They are pure-play bets on the continuation of the current capex surge.
When (not if) the surge moderates — whether from power limits, efficiency breakthroughs, or simply weaker-than-expected enterprise AI revenue — these two sit at the front of the line for margin calls and forced asset sales.
As Warren Buffett wrote in his 2001 shareholder letter about the dot-com bust: “A pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons.” The pin this time is not lack of demand; it is lack of electricity, combined with a mountain of debt that assumes the boom will never pause.
Key Takeaway
The market is currently willing to ignore these risks because AI remains the only sector consistently moving global GDP growth needles. That concentrated optimism is itself one of the biggest dangers. When reality finally asserts itself — when a few high-profile projects go dark, when quarterly guidance misses start rolling in, when credit spreads on data-center debt widen — the rotation out of the most leveraged names will be swift.
Oracle and Digital Realty are not doomed companies, but they are priced for a perfect outcome that is looking less probable by the month. Prudent investors can use the remaining euphoria to protect their portfolios by trimming exposure, raising cash, or rotating into less levered parts of the ecosystem.
The reckoning is not a question of if, only of when Buffett’s pin finds the bubble.
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