The World's Hottest Trade Is Built on Fake Money — And It's About to Collapse
The dominant theme for the markets since late 2022 has been the AI trade.
Since Chat-GPT was unveiled by OpenAI in November 2022, AI-related stocks have accounted for 75% of market gains, 80% of market profits, and 95% of capital expenditures.
Put simply, this bull market has effectively been on gigantic bet on AI. And over the last six months, several red flags have emerged in this investing theme.
First and foremost, OpenAI CEO Sam Altman admitted in August 2025 that the Ai revolution was in a bubble similar to that of the Dot Com bubble. It is HIGHLY unusual for someone whose wealth/ employment/ social clout is tied up with a particular technology to admit that said technology is in a bubble. One wonders what Mr. Altman knew at the time that led him to state this.
Soon after this statement, the AI-trade began to stagnate. Big Tech/ the Mag-7 which are THE primary AI-companies in the market, spending over $400 billion per year on the AI-build out peaked in September 2025. They’ve since traded sideways for six months. And unfortunately for the stock market bulls, the MAG-7 ETF has broken down out of a massive bearish rising wedge formation.
Which brings us to our second concern: circular AI deals.
Throughout the second half of 2025, the Big-Tech companies most involved in the AI began engaging in two worrisome practices:
- Circular deals.
- Issuing large amounts of debt to finance their capital expenditures.
Regarding #1, Microsoft (MSFT), Nvidia (NVDA), and other AI-companies began investing billions of dollars in their customers who would then turn around to use the money to buy services from MSFT and NVDA.
For example, Microsoft’s $13 billion investment in OpenAI was largely spent on MSFT’s Azure cloud services, while Nvidia’s $100 billion commitment to OpenAI was expected to fund the purchase of NVDA’s own chips.
Obviously, this is NOT a sustainable business practice. The below graphic reveals just how preposterous this situation was becoming.
Which brings us to #2: debt issuance.
Big-Tech/ Mag-7 are the most profitable companies in history. Collectively, these seven stocks generate over $600 BILLION in operating profits. And yet, despite this obscene profitability, these companies are increasingly turning to debt issuance to finance their AI-spending.
Collectively these companies issued $121 billion in 2025. The pace is not slowing down either, Alphabet (GOOGL) just announced it intends to issue ~$30 billion in debt that will mature in 100 years.
Put simply, over the last six months, the bull case for the AI trade has worsened dramatically. And by the look of things, this bubble is about to find its pin.
At the center of the AI-narrative is OpenAI: a company that claims it is worth $1 trillion despite only generating ~$20 billion in revenue.
In the last month…
- Nvidia has reportedly pulled the $100 billion deal it previously announced.
- Softbank, one of the largest investors in OpenAI revealed that it has not committed to the next round of OpenAI financing.
What do these companies know that is making them pull back from large-scale deals in one of the most dominant players in the AI-space? Why was OpenAI CEO Sam Altman pushing for a government bailout? And what does this mean for the AI trade as a whole?
Again, the markets seem to know…
Given how central AI has been to the bull market (again, AI-related stocks have accounted for 75% of market gains since November 2023), the #1 question for investors today is if a breakdown in the AI trade will result in a stock market crash.
To answer this, I rely on a proprietary indicator that has triggered before every major meltdown in the last 50 years. This signal caught the 1987 crash, the Tech Crash, the Great Financial Crisis and more.
We detail this trigger, how it works, and what it’s saying about the markets today in How to Predict a Crash.
Normally we’d sell this report for $499, but in light of its recent warning, we’re making 99 copies available to the investing public.
To pick up one of the last copies…
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research