Oracle is rattling credit markets. The company’s default risk has surged as its credit-default swaps (CDS) — the cost of insuring its debt — spiked to their highest level in two years. Traders say the signal is clear: investors are growing uneasy about Oracle’s massive AI-driven borrowing spree.
The number is striking. Oracle’s five-year CDS spread jumped to nearly 80 basis points, up from around 55 earlier this year. That’s the steepest climb since late 2023. It means investors now see Oracle’s debt as riskier — and they’re paying more to protect themselves against a possible default.
Behind the move is a single story: AI spending and leverage. Oracle is preparing a $38 billion debt offering to fund new AI and cloud data centers across the U.S., including massive facilities in Texas and Wisconsin. The goal is bold — to challenge Microsoft, Amazon, and Google in the race for AI infrastructure dominance. But the cost is staggering.
Analysts project Oracle’s net adjusted debt could soar to about $290 billion by 2028, up from roughly $100 billion today. That’s a near tripling of debt in just a few years. The market reaction has been swift — bond traders are pricing in higher credit risk, signaling that Oracle’s balance sheet is being stretched thin.
The company insists it’s positioning for long-term growth, betting that AI-driven cloud demand will explode over the next decade. But that vision comes with short-term pain. Heavy capital spending means cash flow will tighten. High interest rates make new borrowing more expensive. And revenue from new data centers takes years to materialize.
Investors are asking a simple question: can Oracle’s AI bet pay off fast enough to justify this debt? Many are skeptical. The company’s traditional database business remains solid, but it doesn’t generate enough incremental cash to offset the pace of new borrowing. Credit markets are responding with caution — not panic, but deep concern.
Despite the headlines, Oracle isn’t on the brink of collapse. It still holds an investment-grade rating and a strong client base. The CDS spike is more about perception than crisis — a reflection of how aggressively the company is moving into capital-heavy AI infrastructure. Traders are hedging against the unknown, not predicting immediate trouble.
Still, the numbers tell a story of risk and timing. Oracle’s next bond sale will reveal how confident investors remain. If demand for its debt is strong and yields stabilize, markets may breathe easier. But if the offering struggles or borrowing costs rise further, pressure could intensify.
The company’s success now depends on execution. It must turn AI promises into profits before interest expenses eat into margins. The AI arms race rewards speed — but punishes missteps. Oracle’s challenge is proving that its spending spree translates into sustained revenue growth, not just bold headlines.
For now, Wall Street’s message is blunt: AI optimism doesn’t erase financial math. Oracle is testing how far it can push leverage in pursuit of technological leadership. Its default fears may be exaggerated — but they’re not unfounded. The market wants proof that Oracle’s AI gamble will pay off before the bill comes due.
Every basis point now tells the story of investor confidence — or the lack of it. Oracle’s CDS at a two-year high is a warning light flashing across credit desks. The company that once symbolized software stability is now the face of AI risk-taking. Whether that risk turns into reward will decide not just its stock price — but its standing in the next chapter of the AI economy.
The primary driver is debt — and lots of it. Oracle is preparing to issue about $38 billion in new bonds to fund its ongoing data-center buildouts across the United States. These facilities are meant to support a wave of new AI and cloud computing projects, positioning Oracle to compete head-on with Amazon Web Services, Google Cloud, and Microsoft Azure.
However, this spending spree is adding substantial pressure to its balance sheet. Analysts estimate Oracle’s net adjusted debt could more than double to nearly $290 billion by 2028, compared with roughly $100 billion today. That sharp increase has made traders and analysts nervous, as it means the company will rely heavily on future profits to pay off today’s massive expansion.
Investors are watching to see whether Oracle’s AI ambitions can translate into faster growth — or if it becomes another example of over-leverage in a high-rate environment.
This transformation requires enormous upfront investment. Unlike its traditional database software, which brings in steady recurring revenue, AI infrastructure carries long payback cycles. The company must spend billions before it sees meaningful returns.
That’s where the tension lies. Markets see Oracle’s big AI gamble as both an opportunity and a risk. The AI cloud race is heating up, and Oracle wants to be at the center of it. But with interest rates still elevated and competition intense, investors worry that returns might take longer to arrive.
For now, Oracle’s core businesses remain solid. Its database division continues to deliver strong revenue, and enterprise clients are expanding their spending on cloud migration. Yet the company’s new debt load could tighten its financial flexibility — especially if AI revenues grow slower than expected.
What’s happening instead is a wave of risk hedging. Investors and bondholders are buying insurance against Oracle’s debt to protect themselves if the company’s borrowing costs continue to rise. This is common when a company embarks on a heavy spending cycle.
Still, the higher CDS levels serve as a warning sign. They show that traders are factoring in uncertainty about how quickly Oracle’s new AI infrastructure will generate returns. If the company misses growth targets or delays projects, credit costs could climb even higher.
That said, Oracle’s long-term fundamentals remain strong. It still commands a large share of the enterprise software market and has strong recurring cash flows. The concern is not collapse — it’s whether Oracle can manage aggressive growth without overextending its financial risk.
Analysts will also be watching key financial metrics — particularly debt-to-EBITDA ratios, free cash flow, and AI-related revenue growth. These figures will indicate whether the company’s spending is translating into sustainable earnings.
If Oracle’s AI and cloud operations gain strong momentum, its credit risk could ease quickly. That would send CDS spreads lower and restore confidence. But if adoption slows or costs spiral, Oracle could face tighter borrowing conditions in the years ahead.
The stakes are high. AI infrastructure is the future, but it’s also a cash-hungry business. Oracle is betting billions that it can catch up with the leaders. Whether that bet pays off — or becomes a burden — will define its next decade.
The number is striking. Oracle’s five-year CDS spread jumped to nearly 80 basis points, up from around 55 earlier this year. That’s the steepest climb since late 2023. It means investors now see Oracle’s debt as riskier — and they’re paying more to protect themselves against a possible default.
Behind the move is a single story: AI spending and leverage. Oracle is preparing a $38 billion debt offering to fund new AI and cloud data centers across the U.S., including massive facilities in Texas and Wisconsin. The goal is bold — to challenge Microsoft, Amazon, and Google in the race for AI infrastructure dominance. But the cost is staggering.
Analysts project Oracle’s net adjusted debt could soar to about $290 billion by 2028, up from roughly $100 billion today. That’s a near tripling of debt in just a few years. The market reaction has been swift — bond traders are pricing in higher credit risk, signaling that Oracle’s balance sheet is being stretched thin.
The company insists it’s positioning for long-term growth, betting that AI-driven cloud demand will explode over the next decade. But that vision comes with short-term pain. Heavy capital spending means cash flow will tighten. High interest rates make new borrowing more expensive. And revenue from new data centers takes years to materialize.
Investors are asking a simple question: can Oracle’s AI bet pay off fast enough to justify this debt? Many are skeptical. The company’s traditional database business remains solid, but it doesn’t generate enough incremental cash to offset the pace of new borrowing. Credit markets are responding with caution — not panic, but deep concern.
Despite the headlines, Oracle isn’t on the brink of collapse. It still holds an investment-grade rating and a strong client base. The CDS spike is more about perception than crisis — a reflection of how aggressively the company is moving into capital-heavy AI infrastructure. Traders are hedging against the unknown, not predicting immediate trouble.
Still, the numbers tell a story of risk and timing. Oracle’s next bond sale will reveal how confident investors remain. If demand for its debt is strong and yields stabilize, markets may breathe easier. But if the offering struggles or borrowing costs rise further, pressure could intensify.
The company’s success now depends on execution. It must turn AI promises into profits before interest expenses eat into margins. The AI arms race rewards speed — but punishes missteps. Oracle’s challenge is proving that its spending spree translates into sustained revenue growth, not just bold headlines.
For now, Wall Street’s message is blunt: AI optimism doesn’t erase financial math. Oracle is testing how far it can push leverage in pursuit of technological leadership. Its default fears may be exaggerated — but they’re not unfounded. The market wants proof that Oracle’s AI gamble will pay off before the bill comes due.
Every basis point now tells the story of investor confidence — or the lack of it. Oracle’s CDS at a two-year high is a warning light flashing across credit desks. The company that once symbolized software stability is now the face of AI risk-taking. Whether that risk turns into reward will decide not just its stock price — but its standing in the next chapter of the AI economy.
Why are Oracle’s default risks rising now?
The recent surge in Oracle’s CDS reflects the market’s reaction to its aggressive borrowing spree. The company’s five-year CDS spread has climbed close to 80 basis points, up sharply from earlier levels near 55. That’s a sign that investors now view Oracle’s debt as riskier than before.The primary driver is debt — and lots of it. Oracle is preparing to issue about $38 billion in new bonds to fund its ongoing data-center buildouts across the United States. These facilities are meant to support a wave of new AI and cloud computing projects, positioning Oracle to compete head-on with Amazon Web Services, Google Cloud, and Microsoft Azure.
However, this spending spree is adding substantial pressure to its balance sheet. Analysts estimate Oracle’s net adjusted debt could more than double to nearly $290 billion by 2028, compared with roughly $100 billion today. That sharp increase has made traders and analysts nervous, as it means the company will rely heavily on future profits to pay off today’s massive expansion.
Investors are watching to see whether Oracle’s AI ambitions can translate into faster growth — or if it becomes another example of over-leverage in a high-rate environment.
Is AI expansion turning into a financial burden?
Oracle’s strategy centers around cloud and AI infrastructure. The company is racing to build data centers that can handle the next generation of AI-driven workloads — from model training to enterprise automation.This transformation requires enormous upfront investment. Unlike its traditional database software, which brings in steady recurring revenue, AI infrastructure carries long payback cycles. The company must spend billions before it sees meaningful returns.
That’s where the tension lies. Markets see Oracle’s big AI gamble as both an opportunity and a risk. The AI cloud race is heating up, and Oracle wants to be at the center of it. But with interest rates still elevated and competition intense, investors worry that returns might take longer to arrive.
For now, Oracle’s core businesses remain solid. Its database division continues to deliver strong revenue, and enterprise clients are expanding their spending on cloud migration. Yet the company’s new debt load could tighten its financial flexibility — especially if AI revenues grow slower than expected.
Is Oracle actually close to defaulting?
Despite the alarming headlines, Oracle is not facing imminent default. Its core operations remain profitable, and its credit rating is still investment grade. The rise in credit-default swaps doesn’t mean the company is in distress — it simply reflects that credit markets are pricing in more caution.What’s happening instead is a wave of risk hedging. Investors and bondholders are buying insurance against Oracle’s debt to protect themselves if the company’s borrowing costs continue to rise. This is common when a company embarks on a heavy spending cycle.
Still, the higher CDS levels serve as a warning sign. They show that traders are factoring in uncertainty about how quickly Oracle’s new AI infrastructure will generate returns. If the company misses growth targets or delays projects, credit costs could climb even higher.
That said, Oracle’s long-term fundamentals remain strong. It still commands a large share of the enterprise software market and has strong recurring cash flows. The concern is not collapse — it’s whether Oracle can manage aggressive growth without overextending its financial risk.
Can Oracle’s AI gamble pay off in the long run?
The next year will be critical in determining how this story unfolds. Oracle’s upcoming bond issuance, expected in multiple tranches, will test investor demand and sentiment. The pricing and appetite for that debt will show how much confidence markets still have in the company’s long-term AI strategy.Analysts will also be watching key financial metrics — particularly debt-to-EBITDA ratios, free cash flow, and AI-related revenue growth. These figures will indicate whether the company’s spending is translating into sustainable earnings.
If Oracle’s AI and cloud operations gain strong momentum, its credit risk could ease quickly. That would send CDS spreads lower and restore confidence. But if adoption slows or costs spiral, Oracle could face tighter borrowing conditions in the years ahead.
The stakes are high. AI infrastructure is the future, but it’s also a cash-hungry business. Oracle is betting billions that it can catch up with the leaders. Whether that bet pays off — or becomes a burden — will define its next decade.
