For a brief moment on September 10, Larry Ellison became the richest man in the world. When the 81-year-old founder of Oracle announced a $300 billion deal with OpenAI, the company’s stock soared 36 per cent. Ellison, who owns 41 per cent of the Silicon Valley grandee that he founded in 1977, was worth almost $400 billion.

It was not to last. In the past two months, Oracle’s value has fallen. In the process, it has become the bellwether for investor nerves about an AI bubble, telling a tale of debt, demand and exposure to OpenAI which holds up a mirror to problems in the sector.

Traditionally a software company, Oracle was late to the AI infrastructure party but now provides the cloud and data centre backbone that companies use to run their operations, store data, and build AI applications. Its capital spending could exceed $300 billion by 2030, according to Bank of America analysts.

Up to 80 per cent of data centre development funding is reliant on debt, according to the property business JLL, and Oracle is no exception. Its net debt is almost four times its equity and it is paying for most of its new projects with more borrowing, including an $18 billion bond sale in September. (The bull argument is that these loans are far cheaper than the returns Oracle expects from its future tenants, using the data centres as collateral and being paid back from future rent payments.)

While its deal with OpenAI, backed by a syndicate of more than 30 banks to build up to 4.5 gigawatts of data centre capacity over five years, sent its stock up, it is also part of what brought it down. Concerns continue about the “circularity” of deals in Silicon Valley, involving private businesses whose finances are opaque.

Oracle is playing a key role in the $500 billion US Stargate project, alongside OpenAI and Softbank, its partners in the AI joint venture. OpenAI is not yet profitable. It is expected to be loss-making for years to come and will need $207 billion in additional financing by 2030, HSBC analysts predicted on Monday. Furthermore, its projected $1.4 trillion bill for computer power over the next eight years is making investors nervous about whether the returns will justify the spending. As a result, Oracle’s exposure to it could be a problem.

When it comes to building data centres, like others, Oracle is facing bottlenecks beyond its control. It is unclear if it can hit its massive growth goals because of challenges with land, construction capacity, power supply and most importantly, a supply of processors.

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A red flag is the cost of credit default swaps (CDS), the insurance on a company’s debt. Investors pay a fee, and if the borrower fails to pay back its loans, the CDS pays out. A higher price indicates a greater risk of default.

On Friday, Oracle’s CDS hit $118,830 per year to protect $10 million of the company’s debt from default over five years. On average this year it was $47,745, Bloomberg data showed.

This is not just about Oracle. People see its credit default swaps as a way of hedging for the entire industry, in the event that it goes bang. It is notable that Coreweave, an AI data centre company yet to make money, has also seen its CDS cost spike.

But there is a final, Oracle-specific, plot twist. Plenty of financial institutions, including the Bank of England, have cautioned that a bubble burst would have global repercussions. Oracle’s share price has an added (dramatic) impact.

Ellison, the controlling shareholder of Paramount Skydance, is backing his son David, the studio’s chief executive, in his cash bid for Warner Bros Discovery. Preliminary offers went in last week; 30 per cent of Ellison’s stake in Oracle is currently pledged as collateral “to secure certain personal indebtedness”, some believe, to support these business endeavours.

So for this deal, Oracle’s share price matters and the future of Hollywood could be shaped by data centre demand. Th-th-th-that’s all, folks!