Circular AI Deals Fuel Bubble Debate | Bloomberg Tech: Asia 11/28/25

The piece flags growing market anxiety about “circular” AI financing where suppliers, investors and hyperscalers recycle capital into data centers and chip purchases, raising bubble and liquidity risks. Key datapoints: SoftBank sold its entire Nvidia stake for $5.8bn and ~$9bn of T‑Mobile assets while committing to invest ~$30bn into OpenAI; Bloomberg Economics forecasts Korean chip demand rising ~35% next year; Alibaba Cloud revenue rose roughly $132m in the latest period. The story highlights concentration risk (NVIDIA/TSMC at the top of the stack), strains on balance sheets and credit (rising debt and stressed CDS on some hyperscalers), and the potential for a meaningful re-rating if monetization or demand falls short.

Analysis

Market structure: The immediate beneficiaries are semiconductor foundry and memory suppliers (TSM, Samsung, SK Hynix) as Bloomberg Economics forecasts ~35% YoY higher demand for Korean HBM next year; TSMC (TSM) sits atop the stack as an impartial volume aggregator. Losers are pure-play LLM/inference infrastructure providers with weak monetization (ORCL’s infra leasing showing ~17% gross margin vs legacy ~70%) and leveraged financial sponsors (SoftBank) exposed to circular financing. Cross-asset: widening CDS on ORCL and rising credit spreads for leveraged AI plays, higher tech IV in options, and upside pressure on industrial metals and specialty silicon prices in near-term supply tightness.

Risk assessment: Tail risks include a liquidity crunch at large model operators (OpenAI/SoftBank) forcing asset sales, a re-rating if Google/Meta commoditize LLMs, or regulatory clampdowns on cross-border data/infrastructure within 12–24 months. Immediate (days–weeks) catalysts are quarterly guides/TSMC order cadence and Oracle margin disclosures; medium-term (3–12 months) risks are SoftBank maturities and hyperscaler capex pauses; long-term (2–5 years) is commoditization of LLMs depressing software ASPs. Hidden dependencies: circular revenue-sharing, supplier-funded hyperscaler capex, and HBM inventory days — small shocks can cascade to foundry revenue and credit markets.

Trade implications: Tactical trades: establish a 2–4% long in TSM (TSM) over 6–12 months, trimming if TSMC revenue guide misses by >5% or utilization drops below 90%. Short ORCL (2–3% equity or buy 3‑6 month 10–15% OTM put spreads) given margin erosion; hedge with a 1–2% long in AMZN/GOOGL for diversified cloud exposure. Use pair trade: long TSM / short ORCL to capture structural hardware durability vs software infra weakness; consider buying ORCL CDS or 6‑month protection if CDS > baseline +50bp expansion.

Contrarian angles: Consensus underweights hardware durability — infrastructure vendors (TSM, Samsung) have pricing power from constrained HBM/foundry capacity and are likely underpriced if a software bubble bursts. The market may have over-penalized Oracle and SoftBank; a controlled pullback in AI spend could re-rate hyperscaler cloud names (GOOGL, AMZN) rather than foundry winners. Watch leading indicators: TSMC utilization, HBM ASPs, SoftBank debt maturities within 90 days, and OpenAI paying-subscriber conversion (threshold: >5% conversion of active users to paying within 12 months to justify scale economics).

Key Decisions for Investors

• Establish a 2–4% long position in TSM (Taiwan Semiconductor) with a 6–12 month horizon; reduce/exit if next-quarter revenue guidance misses by >5% or fab utilization falls below 90%.
• Initiate a 2–3% short position in ORCL (or buy 3–6 month 10–15% OTM put spreads) to capitalize on reported infrastructure gross-margin compression; add ORCL CDS protection if spreads widen by +50bp within 60 days.
• Implement a pair trade: Long TSM (2%) / Short ORCL (2%) to express durable hardware demand vs fragile infra monetization; rebalance after TSMC monthly order updates or Oracle margin releases (check quarterly).
• Reduce direct equity exposure to deeply leveraged thematic holders (SoftBank) by trimming position size by 50% if SoftBank fails to secure >50% of its committed OpenAI funding from third parties within 90 days; alternatively buy 6–12 month downside protection (puts) sized to 2% of portfolio.
• Options tactical: Buy ORCL 3‑month put spreads (10–15% OTM) and buy directional call spreads on GOOGL or AMZN (3–6 month) as diversified upside to benefit if hyperscalers capture monetization; size options exposure to 0.5–1% portfolio risk each.