I might temporarily regret that subtitle. I am writing this literally hours before Nvidia's Q3 earnings report is released. This report has loomed large over the AI industry, as, depending on the data involved, it could bolster or crush the AI bubble. But, even if Nvidia smashes its earnings target, and this stupid bubble gets one last breath of air, it won't matter. I genuinely believe the mechanisms in place to pop the bubble are already bursting it. Why? Because Peter Thiel has just sold off his entire stake in Nvidia. That alone isn't much. But when you pull the thread and ask, "Why has the person at the core of this AI movement sold every last share of one of the best-performing AI stocks?" and "Why now has the entire AI narrative fallen apart?", the imminent crash becomes painfully apparent. Let me explain.

A filing on November 17th showed that Peter Thiel's hedge fund had sold off its entire $100 million stake in Nvidia sometime during the 2025 third quarter. This one sale alone shrank the fund's holdings by two-thirds and netted a truly enormous profit.

Nvidia is the best-performing AI stock, having grown by roughly 100% this year. Not only that, but its deals with OpenAI, Corewave and others are set to rake in hundreds of billions in revenue over the coming years. In other words, if the AI bubble isn't a bubble at all and instead a fledgling industry, then Nvidia will likely continue to grow at this astonishing rate for the foreseeable future. So, why has Thiel sold up? He himself, as the founder of Palantir, an early investor in OpenAI, and a venture capitalist behind almost all big AI projects, had a significant hand in forming and growing this AI frenzy. He has a huge vested interest in AI not being in a bubble. So why sell Nvidia, and why now?

Debt & Nvidia

Well, when you look at Nvidia's customers and how they are financing their enormous purchases from Nvidia, you quickly realise that this gravy train isn't going to last long.

I have covered this topic before, but the AI startups used to use equity financing (where a company sells off shares to raise funds) to pay for AI's spiralling costs, whereas established companies like Meta and Amazon used their giant hoards of cash reserves. However, these are no longer enough to keep the AI money pit satiated, and so the entire industry is rapidly turning to debt financing to keep the lights on. Alphabet, Amazon, Meta, Microsoft, and Oracle have issued around $100 billion in bonds (a form of debt financing) so far this year, with the significant majority being issued since September. Likewise, OpenAI is now actively looking to raise debt to pay for its $1 trillion-plus expenditure plans.

This is a genuinely gargantuan increase in borrowing for these companies. Especially when Big Tech has historically been incredibly cash-rich.

But this debt is good, right? Almost all of that money is going to be funnelled into Nvidia to build these AI hyperscaler colossal datacentres from their chips. So, what is the problem?

One word: risk.

The AI industry is actually moving further away from profitability, as costs are increasing exponentially while revenue growth stagnates, thanks to AI models not being all that useful and their improvement crawling to a halt. This problem is so overwhelming that even if these generative AI giants came to dominate markets like search engines or the porn industry, there wouldn't be enough revenue to get even close to profitability.

This has caused some significant issues within the AI bubble. For example, Meta's stock is down 25% from August. This slide is almost entirely due to investors worrying that Meta's AI program can't repay the nearly $30 billion in debt it is raising to fund its development. Other AI companies, like Microsoft, are down 9% in just over a month for similar reasons. This has made equity financing a no-go, not just for these established companies but also for the AI startups like OpenAI, which are tied at the hip to them.

That means debt is the only real way for these AI programs to keep going. Unfortunately, that isn't sustainable at all, leading lenders to become extremely cautious.

As such, AI-tied bond insurance (a type of insurance that guarantees payment on a bond, protecting against default) has grown from less than $25 billion before September to well over $100 billion. Notice that this timeline matches perfectly with Alphabet, Amazon, Meta, Microsoft, and Oracle's bond sell-offs? This is a glaring sign that private and institutional investors are expecting the bubble to pop imminently and for these loans to default. But, as demand for these insurances rises, their cost increases. So, this significant leap in AI-tied bond insurance means that the entire AI industry is going to have a far harder time raising funds through debt.

If we bring this back around to Nvidia, we can see a cash problem of biblical proportions. The entire AI industry is stuck between a rock and a hard place, as the two main ways they can gain the funds they desperately need to keep their wildly unprofitable lights on are beginning to shut down. But Nvidia's speculative future growth depends on selling these guys more than a trillion dollars' worth of chips, which it now looks like they can't afford. In investor-speak, that means a value crash is inbound, which is why Thiel is trying to sell at the peak.

But why is this happening now and not in a few months' time? After all, the funds from these recent bond sales haven't fully hit Nvidia's books yet, so its value could still go up for a little bit.

Well, Nvidia's current income is also hugely uncertain. Analysts are predicting its Q3 earnings will be a whopping 56% more than its 2024 Q3 earnings. But factors like Nvidia's questionable circular financing deals with OpenAI have made hordes of investors question whether they can hit this ambitious mark. In fact, the options market from the day before Thiel sold his Nvidia stocks suggests that investors expect Nvidia's share price to move up or down by 7%, depending on how this earnings report goes.

Now, let's not forget that through his investment in most AI companies, Thiel has a better view of the AI landscape than anyone else. He will have a good idea of whether this prediction is an overestimate. He will also have seen the equity finance and debt finance doors closing on the AI industry before it was public knowledge. So, it is safe to assume he believes Nvidia's future revenue is in jeopardy and that it will miss its earnings targets, and he is selling before he is hit with a huge loss.

As I am writing this, I don't know if that is what happened. The report is still hours away. But you, reading this, will know if Thiel was right.

Stock Market Fragility

However, there is a really important piece of context for this Thiel Nvidia sell-off, AI cash crunch and potential Nvidia investor pull-out. You see, AI tech stocks have made up over 75% of the S&P 500's gains so far this year. This has made both the US economy and stock market highly fragile, as their growth isn't diversified, and made AI stock valuations look incredibly risky.

In August, this fragility became evident. While this was a good overall month for indices like the S&P 500, it had serious internal volatility, as the Big Tech hyperscalers that made up most of this growth became increasingly volatile. This volatility had plenty of causes, such as investors' fears over AI companies raising debt, as we previously covered, as well as general fears about the wider US economy. However, this level of volatility, particularly for such a precarious industry, can signal an upcoming mass sell-off, as it shows signs of waning trust. If you believe there is an AI bubble, and it is ripe to burst, then this volatility alone can be a sign to sell up. Considering Thiel sold his Nvidia stock in Q3, this may have been his trigger.

On Monday, November 17th, fears of such a sell-off were confirmed when the S&P 500 dipped below its 50-day moving average for the first time in 138 days, with the vast majority of the losses coming from the AI hyperscalers.

Why is this critical context?

Well, Thiel bailing on Nvidia effectively confirms there is an upcoming AI financing squeeze that will heavily impact the largest AI companies in the near future. But the value of these aforementioned companies is already highly fragile, with investor trust rapidly dwindling. So, when that financial squeeze hits, it is going to hit even harder. This context heavily implies that the AI bubble won't slowly deflate but violently burst.

Summary

This is why I believe the AI bubble has already begun to burst, and if Nvidia posts a miraculously good earnings report in a few hours from when I am writing this, it won't change my mind. AI needs hundreds of billions of dollars a year to be pissed away on it without a hope in hell of ever seeing it again just to stop the entire industry from going bankrupt. Yet, the equity financing rug is being pulled from under it, while the debt safety lines that held it up are being taken away. This is the piece of the puzzle that has been missing all this time. I knew the AI bubble existed, but I didn't know what mechanism would pop it. This credit squeeze is that mechanism. The pin has not only been drawn but thrust into the bubble. The first tears are starting to show, and the investors are ready to drop their stock ASAP. This is it, folks. We might as well sit back and enjoy the spectacle.