If a Bear Market Is Coming, 2 Stocks You Don't Want to Own -- and 1 You Do
Key Points
If a bear market hits, it will likely be driven by indebted companies betting big on AI infrastructure.
Oracle and CoreWeave both carry huge debt loads, making them vulnerable if AI spending slows.
Berkshire Hathaway, with nearly $400 billion in cash, is built to not just survive a downturn but to capitalize on it.
- 10 stocks we like better than Berkshire Hathaway ›
It's been a wild ride for investors this year. After falling more than 7% in the first four months, the S&P 500 is up nearly 20% in the months since. As is usually the case, the ride for the tech-heavy Nasdaq Composite has been even more jarring: down more than 10% through April and now up nearly 25% from that low.
Given all that's happening in the world, some investors are nervous that the recent run will reverse. If this happens, and a bear market -- a 20% drop in the stock market -- is coming, here are two stocks I think will fall much further, and one that will fare far better than most of the market.
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Why a bear market would likely start with AI
Before we get into the specifics, let me set this up. To my mind, the most likely scenario that leads to a bear market (or something worse) would center around major issues in the AI industry that have been driving the market higher for years now.
Given that roughly 40% of the S&P 500's value sits in just 10 stocks, nearly all of which are giant tech companies, it would seem unlikely for the rest of the market to tank while AI companies keep chugging along.
Oracle: Impressive growth, but built on a mountain of debt
On the surface, Oracle (NASDAQ: ORCL) looks terrific. Revenue for Oracle Cloud Infrastructure (OCI), the part of the business that rents computing power to other companies, rose 46% to $9.9 billion in the fourth quarter of fiscal 2026 (ended May 31). The company's remaining performance obligations (RPO) -- contracted revenue it hasn't delivered yet -- reached an incredible $638 billion.
Image source: Getty Images.
But there's a catch: Oracle is paying for that growth with borrowed money. Total debt has reached a whopping $156 billion. Sitting on top of that is $261 billion of data-center lease commitments that haven't hit the balance sheet yet.
Free cash flow (FCF), the money left over after running the business and paying for new construction, was negative $24.5 billion in fiscal 2026. That is quite a shortfall.
Perhaps most concerning, about half of Oracle's $638 billion backlog is supposed to come from one company: OpenAI. The maker of ChatGPT is burning through cash at a rate we've basically never seen and is on the hook for trillions during the next five years.
That is a risky position to be in. Oracle has leveraged itself to a serious degree and is heavily reliant on a company that very well may have trouble paying.
CoreWeave: The same risks, but even more extreme
CoreWeave (NASDAQ: CRWV) has more or less the same issues as Oracle, just to an even more extreme degree. If AI demand slips, and OpenAI cannot figure out how to make more money than it spends, CoreWeave could be in serious trouble.
Unlike Oracle, there's no older, boring business to fall back on. CoreWeave is a neocloud, and its entire model -- renting out Nvidia chips to AI labs -- relies on AI to continue booming.
So although revenue more than doubled last quarter to $2.08 billion -- incredible growth -- I'm not impressed given the debt it's taking on to drive that growth. Total debt was nearly $25 billion at the end of March against just $2.24 billion of cash.
Berkshire Hathaway: The stock I'd want to own in a downturn
Berkshire Hathaway (NYSE: BRKB) is the one I'd want if things turn south. As I said, a bear market would in all likelihood be driven by trouble in the AI market, so my top picks aren't going to be AI companies.
Berkshire is built to not just handle down markets, but take advantage of them. Where the other two companies are up to their eyeballs in debt, Berkshire is flush with cash -- a lot of cash, nearly $400 billion. That's capital it can deploy during a market decline, buying good companies at a discount.
To be fair, the defensive nature of Berkshire has a cost, and the stock lags the market during tech-fueled rallies. But it's a wonderful hedge for investors with lots of tech exposure, and it's exactly what you want to be holding if the market tanks.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Nvidia, and Oracle. The Motley Fool has a disclosure policy.
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