Key points
- Oracle (ORCL) reports a $638 billion backlog as one aggregate line. S&P had to estimate that half of it traces to OpenAI.
- The BIS says terms of AI's chip and compute deals are "typically poorly disclosed," with a risk the same asset is pledged more than once.
- Its July 14 working paper models over-investment at 1.5x the efficient level, reaching 3x where demand is less elastic.
- Michael Burry sent readers to the BIS work on July 23. His own trades moved behind a paywall when he deregistered Scion.
Michael Burry spent July 23 pointing his readers at a Bank for International Settlements report on how AI deals get financed. The clearest illustration of its argument sits in an Oracle (ORCL) filing. Oracle reports its remaining performance obligations as a single figure. The most recent one reads $638 billion. That line covers every contract the company has signed and has yet to deliver. Accounting rules ask for the total and the expected timing. Customer names sit outside that requirement, and Oracle leaves them there.
You can measure the gap by the work other people did to fill it.
S&P Global Ratings cut Oracle to BBB- on July 9, one step above junk. To explain the decision it published an estimate: half of the $638 billion traces to OpenAI. The Wall Street Journal reported the contract underneath separately. That deal runs five years and exceeds $300 billion, starting in 2027. So the size of Oracle's largest customer relationship, the one that drove the downgrade, reached the public through a ratings analyst and a newspaper.
Oracle does describe the shape of the exposure in its own words. The 10-K, in its risk factors, puts some data centre lease terms at 15 to 19 years. It adds that if a customer walks at the end of one, the company may be unable to sublease, reconfigure or transfer that capacity. A reader learns how long the commitment runs. That same reader learns how badly it would hurt to be left holding it. The counterparty's name stays out of it.
The BIS put a name on the pattern
The BIS published its Annual Economic Report on June 28. Its section on financial vulnerabilities describes hyperscalers, chip makers and AI labs as "linked through a complex web of private arrangements." The examples it lists are equity stakes, purchase commitments and data centre leases carrying "embedded exit clauses." Then it delivers the verdict in one sentence: "The terms of such deals are typically poorly disclosed, with risks of the same asset being pledged multiple times."
The report puts these arrangements at "a sizeable share of sector-wide financing and forward revenue." That's a large claim, and it's coming from the institution that serves as banker to the world's central banks. Plumbing like this is most of what the BIS looks at.
Putting a number on the overbuild
On July 14, the BIS followed with a working paper called "The AI investment race," written by Phurichai Rungcharoenkitkul. It models the build-out as a race where rivals commit early to avoid losing a winner-take-most market. The model lands on over-investment of 1.5 times the efficient level. Where demand proves less elastic than the spending assumes, that figure reaches three times. The paper ranks the build-out among the largest technology-driven investment booms in US history. It warns that "stress in one firm could cascade to others through chains of financial exposures."
Burry pointed his readers there
That July 23 post carries the BIS in its own title. Burry writes on Cassandra Unchained, his Substack, and he's spent months betting against pieces of the AI trade, Oracle among them. A central bank arriving at a version of his own argument is the kind of thing he passes along.
His own disclosures have travelled the opposite way. Burry deregistered Scion Asset Management, which ended the quarterly 13F that once listed his US holdings for anyone to read free. The July 23 post carries one purchase outside the paywall. He added Tencent at HK$448.60 a share, about $57. His July 24 post lists three buys and four bets against, plus a note on Palantir (PLTR), and that's all for paying subscribers.
What stays out of reach
The BIS complaint applies to the BIS evidence too. Whether any particular asset carries two pledges sits inside private contracts. So the report describes a structure that permits the practice, then stops. The same boundary runs through Burry's July 24 trades, which belong to his subscribers. It runs through the customer split behind Oracle's backlog, which belongs to Oracle. What's public is narrower, and it's still worth the time. A filing gives one aggregate number. A ratings agency supplies an estimate for half of it. The lease terms run to decades. Two BIS documents three weeks apart both say the gap is the point.
For the mechanics of how these deals get built, we covered those here. On whether copying a famous investor's disclosures actually works, our read of the data is here. Oracle's filings sit on its ORCL page.
