Oracle Corporation has become a focal point of growing concerns over artificial intelligence debt, with a key credit-risk gauge tied to its bonds closing at its highest level since the global financial crisis. On Tuesday, the cost to protect against Oracle's default via credit default swaps (CDS) reached approximately 1.28 percentage points annually, based on ICE Data Services pricing. This marks a sharp increase from 0.36 percentage points in June and is the highest close since March 2009, jumping almost 0.03 percentage points in a single day.
The spike reflects fears over the gap between massive AI investments and delayed profitability gains. Oracle has issued tens of billions in debt, including an $18 billion bond sale in September, to fund its AI infrastructure expansion, with total debt around $105 billion. Its AI push is closely linked to OpenAI, expecting hundreds of billions in revenue from this partnership. Hans Mikkelsen of TD Securities compared the surge to past manias like the dot-com bubble, while Morgan Stanley warned CDS could approach 2 percentage points.
Simultaneously, Oracle's stock showed a modest 1% recovery on Tuesday after a brutal November where shares fell 23.1%, erasing gains from a September earnings report that revealed a $455 billion backlog driven by a $300 billion OpenAI deal. Analysts from Deutsche Bank and HSBC remain bullish, citing strong fundamentals and long-term AI margin targets, but concerns over Oracle's debt and OpenAI dependence persist.
For cryptocurrency markets, this stress signals potential cracks in the AI-driven tech boom, which could dampen investor risk appetite and lead to increased volatility in correlated digital asset sectors.
