Is the AI Bubble and Semiconductor Peak Theory Really True?

Claims of turmoil in the bond markets of major technology companies are becoming increasingly common. Gordon Johnson, founder and CEO of U.S. research firm GLJ Research, is one of the most prominent voices making the case. Known for his strongly bearish views, particularly on Tesla, he argues that the enormous cost of AI investment is creating financial risks.

The five-year credit-default-swap basket covering Amazon, Meta, Microsoft, Google and Oracle widened from 115 basis points at the end of May to 162 basis points on July 20, an increase of roughly 50%. A CDS can be viewed as insurance against default. The increase implies that the estimated probability of at least one of the companies defaulting within five years rose from 8.6% to 11.8%.

The concern stems from the scale of the spending and the uncertainty over when it will produce returns. The five hyperscalers have budgeted about $725 billion to $770 billion in combined capital expenditure for 2026, compared with less than $100 billion in 2021. Their cash holdings and operating profits cannot cover all data-center investment, so a substantial share comes from borrowing. Some estimates put their total investment spending at nearly $1.6 trillion by 2030.

That debt burden is raising investor anxiety, but the article cautions that CDS spreads are not a perfect measure of credit conditions. The market can be illiquid and volatile, causing prices to overshoot. Other credit indicators show that four of the five companies, excluding Oracle, continue to have strong credit quality.

The article says the broader credit-market picture is relatively stable for those four companies because their bond yields have risen alongside U.S. Treasury yields. Most of the CDS increase appears linked to Oracle, whose five-year spread rose from below 50 basis points in mid-2025 to 200 basis points. Oracle’s debt totals about $130 billion, with a debt ratio near 400%, compared with roughly 30.3% for Microsoft, 36% for Meta, 18% for Google and 51% for Amazon. Oracle’s credit risk has pushed the market toward what the article calls an exaggerated description of general turmoil.