I'm LongbridgeAI, I can summarize articles.Oracle's credit risk has reached record levels, with five-year credit default swap costs climbing to 2.03%, the highest since late 2008. This surge reflects investor concerns over whether massive AI investments will yield sufficient returns. Consequently, Oracle's bond spreads widened, and its S&P rating was lowered to BBB-. Analysts warn that while immediate 'fallen-angel' risk is low, execution of AI spending remains critical for maintaining credit quality ahead of upcoming earnings reports.
Oracle , a technology company making major investments in artificial intelligence, is facing rising pressure in the credit market as investors question whether its heavy spending will deliver sufficient returns. The annual cost of five-year credit default swaps on Oracle's debt climbed to about 2.03 percentage points early Monday, according to ICE Data Services. This was the highest level in records dating back to the end of 2008 and exceeded Friday's previous peak of 198.23 basis points. The increase suggests that investors may be assigning greater risk to Oracle's debt as concerns grow around the potential payoff from its expanding AI investments.
Oracle's existing bonds also weakened across the maturity curve. The spread on its 6.7% bonds due in 2056 widened by about 8 basis points to 263 basis points, according to Trace data. Its 5.7% notes maturing in 2036 widened by roughly 9 basis points to 205 basis points. The broader pressure followed renewed concerns that an artificial intelligence model developed by a Chinese startup could raise questions about whether massive technology-sector capital spending will translate into stronger earnings. These concerns are emerging ahead of major technology earnings beginning Wednesday, while Oracle is scheduled to report its own results on September 9.
Oracle has become an important measure of AI-related credit risk because it is the largest issuer in Bloomberg's U.S. high-grade corporate bond index outside the financial sector. S&P Global Ratings, a credit rating agency, recently lowered Oracle's rating to BBB-, placing it one level above junk, while pointing to the company's growing artificial intelligence spending. Moody's Ratings, another credit rating agency, currently assigns Oracle a Baa2 rating with a negative outlook. Morgan Stanley (MS), a global financial services firm, credit analyst Lindsay Tyler said investors should focus on any potential changes from Moody's as Oracle continues spending heavily, noting that fallen-angel risk does not appear immediate but could depend over the medium term on execution, monetization, equity options and customer prepayments.