Concerns over Oracle Corporation’s massive borrowing to fund its artificial-intelligence ambitions have pushed its debt instruments into territory unseen since the 2008 financial crisis. The company’s bonds have sold off, yields on maturing notes have climbed, and its credit default swap spreads have surged — signalling growing investor anxiety about the sustainability of its heavy spending on cloud and AI infrastructure.
The sell-off follows disclosure that Oracle intends to raise an additional US$38 billion in debt to finance further data-centre build-outs and support its AI infrastructure projects. The firm already carries around US$104 billion of debt, including roughly US$18 billion in outstanding bonds. The widening bond yields — particularly on its 2032 and 2033 maturities — reflect mounting pressure from investors doubting whether future revenues will cover such ballooning obligations.
Credit-rating agencies have taken note: both Moody’s and S&P Global Ratings have assigned negative outlooks to Oracle’s ratings, warning that if the company’s capital expenditure continues to outpace operating cash flow, its bonds could slip toward “junk” status. Their concerns centre on weakening free cash flow, heavy leverage, and concentration of AI-related contracts with a small number of counterparties.
The credit market’s unease became more visible when Oracle’s single-name CDS trading rose sharply — hitting levels last seen during the financial crisis. Analysts at Morgan Stanley argue this surge underscores a growing “funding gap” and question Oracle’s ability to service its debt as AI-driven investments strain its balance sheet.
This trend reflects a broader pattern across Big Tech: companies including Oracle are issuing large amounts of new debt to fund ambitious AI infrastructure plans. The flood of debt issuance has strained credit markets, forcing investors to reassess risk across the sector. Whereas the AI boom had been fuelled by investor enthusiasm for transformative technology, credit markets are increasingly warning that few companies may be able to generate sufficient returns fast enough to justify heavy leverage.
For Oracle, the bet hinges on its AI and cloud investments yielding substantial future gains. The company’s large AI backlog and partnerships suggest upside. But growing scepticism over customer concentration, thin margins during early deployment phases, and the challenge of turning capex into cash flow support the view that the company may be stretching its financial safety margin.
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