“Every morning, my Bloomberg startup screen shows CDS spreads Oracle debt,” Morgan Stanley Lisa Shalett, Chief Information Officer, Wealth Management Tell wealth Octoberappears to represent a market increasingly worried about the bursting of the artificial intelligence (AI) bubble. Students of the 2008 financial crisis know that CDS stands for “credit default swap,” a financial instrument used to hedge against huge debt loads elsewhere in the market. Shalett highlighted Oracle CDS because the software giant founded by Larry Ellison is a relative anomaly among the “hyperscale” companies that are fueled by excess debt that is driving billions of dollars in data center investment.
If people start to worry about Oracle’s ability to pay,” Shalett said wealth“That would be an early sign that people are getting nervous.”
that’s why Bank of America “The lack of clarity on hyperscale lending is a key risk heading into 2026,” the research firm wrote on Tuesday, which is why a press release issued by Oracle on Sunday was so influential, not just for Oracle investors but for the entire artificial intelligence industry.
Announcement of 2026 financing planOracle said it expects to raise $45 billion to $50 billion in total cash proceeds and plans to achieve this financing goal by “leveraging a balanced mix of debt and equity financing to maintain a strong investment-grade balance sheet.” The bottom line is that Oracle plans to cover its debt borrowing needs for the full year through a single bond deal, ahead of pricing $25 billion in bonds on Monday, said Bank of America Situation Room analysts Yuri Seliger and Sohyun Marie Lee.
“Transparency on the timing and volume of Oracle’s supply is supportive of the broader market,” the analysts wrote, given how tight credit markets and analysts like Lisa Shalett are in the second half of 2025. The announcement “eliminates hyperscale supply risk” by providing absolute certainty about the timing and scale of Oracle’s participation in the market, the analysts wrote. The stock market doesn’t entirely agree.
stable catalyst
Bank of America believes that by setting the borrowing cap, Oracle is turning a potential oversupply into a supportive signal for the broader high-grade market. The positive knock-on effects were almost immediately apparent, with Bank of America pointing to bonds from other very large companies Yuan It then tightened by about 3 basis points on Monday.
Bank of America said this sets a constructive precedent for the industry. Future bond trades by other tech giants may now serve as positive market catalysts rather than disruptors. Now, for a new deal to serve as a negative catalyst, supply would need to be much larger than these aggressive expectations, a scenario analysts see as challenging given the market is already pricing in as much as $300 billion in hyperscale suppliers.
There’s just one problem with this paper: What happened to Oracle stock late Monday and so far on Tuesday. The reasons for this speak volumes about the importance of corporate communications at this moment in the AI hyperscale industry.
OpenAI Difficulties
The positive sentiment in Oracle’s Sunday press release was erased, if not more, by a separate tweet from the company.
“Nvidia’s deal with OpenAI has zero impact on our financial relationship with OpenAI,” the company said. release exist X noon. “We remain confident in OpenAI’s ability to raise capital and deliver on its commitments.” The stock immediately reversed course, erasing gains of about 2% to trade down 2%, before continuing its decline on Tuesday, down more than 3%.
Oracle is having a tough time. The stock has fallen nearly 12% in just five days, and its market value has been wiped out by more than half since its September highs. investors are Penalize the company Its increasingly unmanageable balance sheet: Oracle is already saddled with about $100 billion in debt and plans to take on another $50 billion to fund the crown jewel of its artificial intelligence strategy: massive data centers built primarily to serve OpenAI.
So far, this strategy has proven difficult to translate into pure growth.
One, demand exceeds supply. Oracle said its data center expansion has encountered labor and equipment shortages, delaying some expansion work and pushing revenue further into the future. “The world of bits changes quickly. The world of atoms doesn’t.” Data center expert James Koomey previously told Fortune magazine. “And the data center is where these two worlds collide.”
Second, and more troubling for investors, Oracle is increasingly faced with a single and highly opaque customer. A large portion of these data centers were built for OpenAI, a private company with more than $1 trillion in debt but only about $20 billion in revenue. Investors have begun to question how OpenAI can scale revenue without sustained, large-scale financing, and because the company is privately held, the market does not have the transparency typically required of such an important entity.
This anxiety is spreading to public markets. Microsoft shares fall The company’s shares fell 12% after the company disclosed that 45% of its future cloud growth is related to OpenAI, while Nvidia’s stock price has also declined in recent days on reports that its expected $100 billion OpenAI investment may be lower than expected.
However, for companies that have leveraged to meet OpenAI-driven demand, the risks are more significant. Oracle has nearly $250 billion in long-term lease commitments tied to data centers with lifespans of 15 to 20 years, many of which are expected to be subleased over shorter periods of time. If demand declines or capital tightens, Oracle could hold on to debt long before cash arrives.