Written by: thiigth

IBM CEO made a chilling statement earlier this month: "There is no way that all this massive spending on AI and data centers will ever be able to pay off."

If this had been said a year ago, it would have been seen as blasphemy against "future technology." But today, on December 2025, as Broadcom fails to meet high market expectations and Oracle's financial statements show rare cracks not seen in decades, market sentiment is undergoing a subtle yet deadly reversal.

This is not just a correction in tech stocks; it could be the collapse of America's "last bastion" of the economy.

01 The End of the Frenzy: From "Buy the Faith" to "Audit Moment"

Over the past two years, the capital market's attitude towards AI can be summarized as a near-religious fervor: "Buy first, ask questions later." Everyone believed this was a disruptive technology that would reshape the world, and as for the profit model? That was something to consider 20 years down the line.

However, as the narrative reaches the end of 2025, the once vague prospects are forced to collide with cold financial realities.

The most typical example is Oracle. This company, once seen as a cash cow, now has a negative Free Cash Flow—an unprecedented sight in decades. To maintain its stock price and high dividends, Oracle has had to take on massive debt.

This is an extremely dangerous signal: tech giants are replacing growth expectations with debt.

Oracle's CEO attempted to reassure the market during a conference call, claiming a commitment to maintaining an investment-grade rating. However, this statement only intensified the panic: a company that has survived for decades on its own cash flow suddenly emphasizes "maintaining ratings" and "borrowing capacity," indicating that they themselves are aware of the tightening cash flow.

The market began to raise questions that were once considered "untimely": What if losses continue next year? If the debt market tightens, who will pay for these expensive data centers?

02 Silicon Valley's "Vanke Moment"

This scenario evokes a strong sense of déjà vu.

If we look back to the real estate bubble period, we find that today's AI giants are replaying a scene from that time. The current AI industry resembles Chinese real estate companies on the eve of a storm—like Vanke.

The logic of real estate developers back then was: as long as they secured enough land and built quickly, future appreciation would cover current debts. Today's AI companies follow the same logic: as long as they hoard enough GPUs and build large enough data centers, the future "AGI revolution" will offset the current massive capital expenditures (Capex).

What Oracle and others are doing is essentially "borrowing old to replace new," trying to defer debt for a year, betting on miraculous revenue growth next year.

But the reality is that Broadcom's backlog, although as high as $73 billion, still falls short of the market's inflated expectations. When growth no longer shows parabolic explosions, even the slightest sign of slowdown triggers panic selling from investors.

Once Free Cash Flow cannot turn positive, the debt-driven growth model will collapse instantly. This is not a technical issue; it is the most basic accounting common sense.

03 What Collapses is Not Just Stock Prices, but the Illusion of Wealth Across Classes

If this were merely a crisis in the tech industry, it might not be so unsettling. What is truly frightening is that the AI bubble has become the only pillar supporting the U.S. macro economy.

The current U.S. economy exhibits a brutal "K-shaped" divergence: the lower and middle classes are experiencing painful layoffs, with tens of thousands of jobs effectively disappearing from the labor market each month. Even Federal Reserve Chairman Powell has had to retreat from the rhetoric of a "strong labor market."

So, why does consumer data still appear not to have completely collapsed?

The answer lies in the "wealth effect." The consumption ability of the wealthy class in the U.S. (especially the baby boomer generation) is almost entirely tied to stock market performance. As long as the Nasdaq index continues to rise, and as long as Nvidia and Oracle's stock prices remain high, they are willing to spend lavishly, thereby masking the plight of ordinary consumers at Walmart and McDonald's.

The AI bubble is, in essence, the last line of defense on the balance sheets of the wealthy.

Once the market realizes that IBM's CEO is telling the truth—that "massive investments cannot pay off"—the valuation system for tech stocks will face a reassessment. When the Nasdaq index corrects as it did in March and April of this year, the illusion of wealth for the rich will shatter.

At that point, we will witness an economic hard landing without any cushion: the lower class has no money to spend, the wealthy are afraid to spend, and companies are burdened with massive AI debts they cannot repay.

04 The Naked Swimmers After the Tide Goes Out

The Federal Reserve seems to have sensed the danger.

Although inflation still appears to be on the rise, divisions within the Federal Reserve are widening. Officials like Austan Goolsbee have begun to suggest that they are more concerned about the deterioration of the labor market than inflation.

This is a policy game of "walking a tightrope": the Federal Reserve must carefully nurture the stock market because they know that the stock market (i.e., the AI bubble) is the last means to maintain the appearance of economic prosperity.

But they have little time left.

The current situation is that companies are burning cash to bet on the future, the wealthy are relying on stock prices to sustain consumption, and the Federal Reserve is betting on a soft landing for the economy before the bubble bursts.

As everyone waits for a turning point in 2026, the real problem may erupt in the coming months: when the first well-known tech company is forced to sell GPUs or data center assets at a low price due to cash flow issues, the dominoes will start to fall.

Just like when the internet bubble burst, people always think "this time is different," until the stocks they hold turn into worthless paper.

For ordinary investors, now may not be the time for greed, but rather the time to consider how to exit. Because when the theater is on fire and there is only one exit, you cannot outrun the crowd.

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