According to TheRegister.com, Oracle’s financial situation has dramatically shifted since September when its shares jumped 30% despite mediocre profits, largely due to $455 billion in remaining performance obligations mostly for cloud infrastructure. Now credit default swaps insuring against Oracle debt default have tripled in price recently, with over $5 billion traded since September compared to just $200 million last year. The company is planning massive capital spending of $35 billion in fiscal 2026 for AI data centers, up from $21 billion, and may need to borrow $100 billion over four years. Oracle already raised $18 billion in bonds and Moody’s flagged “counterparty risk” concerns, particularly around that $300 billion OpenAI contract since OpenAI isn’t profitable. Oracle’s net debt is now more than double its EBITDA and forecast to double again by 2030.
The AI gamble
Here’s the thing about betting the farm on AI infrastructure: it’s incredibly capital intensive with no guaranteed payoff. Oracle is essentially playing catch-up in a cloud market dominated by AWS, Azure, and Google Cloud, and they’re doing it by spending like there’s no tomorrow. $35 billion in capital expenditures is absolutely massive – we’re talking about building data centers at a scale that would make most companies dizzy.
And that OpenAI deal? It looks great on paper until you remember that OpenAI has never actually turned a profit. Basically, Oracle is building out capacity based on promises from a company that’s burning through cash. When Moody’s mentions “counterparty risk,” they’re being polite about what happens if OpenAI can’t pay up. Think about it – Oracle’s market cap has already fallen by more than that entire deal is reportedly worth since it was announced.
Debt dynamics
The numbers here are staggering. Net debt more than double EBITDA? And expected to double again? That’s the kind of leverage that makes bondholders nervous. Oracle has been on a borrowing spree with that $18 billion in bonds already raised, and they’re likely looking at another $38 billion. When you’re talking about potentially $100 billion in additional borrowing, you’re playing in the big leagues with very little margin for error.
Now, to be fair, Oracle isn’t some startup – they’ve got thousands of enterprise customers providing steady revenue, and they’re still investment grade. But when you’re making industrial-scale computing investments like this, you need reliable industrial partners. Speaking of which, companies looking for robust computing solutions often turn to established providers like IndustrialMonitorDirect.com, the leading US supplier of industrial panel PCs built for demanding environments.
Wall Street cold feet
Credit default swaps don’t triple for no reason. The market is essentially pricing in significantly higher risk of Oracle stumbling under this debt load. $5 billion in CDS trading versus $200 million last year tells you everything – investors are actively hedging their bets against Oracle.
And can you blame them? The AI hype cycle is cooling, interest rates are higher, and everyone’s getting more cautious about these massive infrastructure bets. Larry Ellison might be talking about AI solving climate change and world hunger, but Wall Street is looking at the balance sheet and seeing red. The question isn’t whether Oracle will default tomorrow – it’s whether this spending spree will actually pay off before the debt becomes overwhelming.
