{"id":1644,"date":"2025-11-28T05:54:07","date_gmt":"2025-11-28T05:54:07","guid":{"rendered":"https:\/\/newsraise.com\/?p=1644"},"modified":"2025-11-28T05:54:07","modified_gmt":"2025-11-28T05:54:07","slug":"oracle-credit-risk-rises-as-ai-spending-raises-concerns-morgan-stanley-warns","status":"publish","type":"post","link":"https:\/\/newsraise.com\/index.php\/2025\/11\/28\/oracle-credit-risk-rises-as-ai-spending-raises-concerns-morgan-stanley-warns\/","title":{"rendered":"Oracle Credit Risk Rises as AI Spending Raises Concerns; Morgan Stanley Warns"},"content":{"rendered":"<p data-start=\"209\" data-end=\"565\">Oracle Corp. is facing a growing wave of concern in the <a href=\"https:\/\/newsraise.com\/index.php\/2019\/11\/29\/americans-sustain-record-levels-of-credit-card-debt-but-yet-drafting-holiday-depletion\/\">credit markets as the cost of protecting<\/a> its debt from the default state surged to its highest level in three years. According to Morgan Stanley analysts, those pressures may only increase further in 2026, unless the tech giant can reassure investors about its massive artificial intelligence (AI) investment strategy.<\/p>\n<p data-start=\"567\" data-end=\"882\">Throughout November, Oracle\u2019s five-year <a href=\"https:\/\/newsraise.com\/index.php\/2019\/11\/29\/americans-sustain-record-levels-of-credit-card-debt-but-yet-drafting-holiday-depletion\/\">credit default swaps (CDS)<\/a> &#8211; a key gauge of corporate credit risk\u2014climbed sharply, rising to <strong data-start=\"698\" data-end=\"724\">1.25 percentage points<\/strong> a year, based on data from ICE Data Services. If investor unease continues, the CDS could soon surpass the previous records set during the 2008 financial crisis.<\/p>\n<h3 data-start=\"884\" data-end=\"923\"><strong data-start=\"888\" data-end=\"923\">Mounting Risks Behind the Surge<\/strong><\/h3>\n<p data-start=\"925\" data-end=\"1251\">Morgan Stanley credit analysts Lindsay Tyler and David Hamburger warned that Oracle is now juggling a widening funding gap, a rapidly expanding balance sheet, and rising fears of technological saturation. These challenges are being driven largely by Oracle\u2019s<a href=\"https:\/\/newsraise.com\/index.php\/2025\/11\/27\/walmart-launches-ai-prompts-as-chatgpt-shopping-goes-live\/\"> aggressive push to expand its AI<\/a> and cloud data center footprint.<\/p>\n<p data-start=\"1253\" data-end=\"1600\">The analysts noted in a recent report that Oracle\u2019s five-year CDS could breach <strong data-start=\"1332\" data-end=\"1376\">1.5 percentage points in the near future and<\/strong>\u00a0could even approach <strong data-start=\"1402\" data-end=\"1425\">2 percentage points<\/strong> in 2026 if the company doesn\u2019t provide clearer communication about how it plans to finance its growth. For context, Oracle\u2019s CDS peaked at <strong data-start=\"1565\" data-end=\"1591\">1.98 percentage points<\/strong> in 2008.<\/p>\n<h3 data-start=\"1602\" data-end=\"1646\"><strong data-start=\"1606\" data-end=\"1646\">Borrowing Binge to Fuel AI Expansion<\/strong><\/h3>\n<p data-start=\"1648\" data-end=\"2117\">As AI infrastructure spending intensifies across the technology sector, Oracle has become one of the credit market\u2019s key barometers for <a href=\"https:\/\/newsraise.com\/index.php\/2025\/11\/27\/walmart-launches-ai-prompts-as-chatgpt-shopping-goes-live\/\">AI-driven risk.<\/a><\/p>\n<ul>\n<li data-start=\"1648\" data-end=\"2117\">The company tapped the U.S. high-grade bond market in September, raising <strong data-start=\"1873\" data-end=\"1888\">$18 billion<\/strong>.<\/li>\n<li data-start=\"1648\" data-end=\"2117\">That was followed in early November by another large financing effort: a consortium of about 20 banks arranged a project finance loan of roughly <strong data-start=\"2035\" data-end=\"2050\">$18 billion<\/strong> to support construction of a new data center campus in New Mexico.<\/li>\n<li data-start=\"1648\" data-end=\"2117\">Oracle is expected to take over that campus as a tenant once construction is completed.<\/li>\n<\/ul>\n<p data-start=\"2208\" data-end=\"2468\">In addition, lenders recently committed a massive <strong data-start=\"2258\" data-end=\"2273\">$38 billion<\/strong> loan package to help build data centers in Texas and Wisconsin for Vantage Data Centers. These facilities are closely tied to Oracle\u2019s cloud expansion efforts, further fueling investor scrutiny.<\/p>\n<h3 data-start=\"2470\" data-end=\"2514\"><strong data-start=\"2474\" data-end=\"2514\">Why Credit Default Swaps Are Surging<\/strong><\/h3>\n<p data-start=\"2516\" data-end=\"2889\">According to <a href=\"https:\/\/newsraise.com\/index.php\/2025\/09\/17\/strong-retail-sales-signal-resilience-amid-economic-risks\/\">Morgan Stanley, banks<\/a> involved in these large construction loans are likely driving much of the recent increase in CDS trading. When banks extend significant amounts of credit, they often hedge their exposure by buying credit default swaps &#8211; essentially insurance against the borrower defaulting. This hedging activity inflates demand for CDS, pushing up prices.<\/p>\n<p data-start=\"2891\" data-end=\"3144\">The analysts added that while some of these hedges may be unwound once banks sell portions of the loans to other investors, new hedges could emerge later as additional funding needs arise. Oracle\u2019s data center projects, they warn, are far from complete.<\/p>\n<h3 data-start=\"3146\" data-end=\"3188\"><strong data-start=\"3150\" data-end=\"3188\">Near-Term Credit Pressure Expected<\/strong><\/h3>\n<p data-start=\"3190\" data-end=\"3412\"><a href=\"https:\/\/newsraise.com\/index.php\/2025\/09\/17\/strong-retail-sales-signal-resilience-amid-economic-risks\/\">Morgan Stanley<\/a> believes that continued uncertainty around Oracle\u2019s financing plans will likely lead to more hedging by bondholders, lenders, and other market participants. As a result, they have shifted their own strategy.<\/p>\n<p data-start=\"3414\" data-end=\"3653\">\u201cWe are closing the \u2018buy bond\u2019 portion of the basis trade and keeping the \u2018buy CDS protection\u2019 position,\u201d the analysts wrote. As per the financial analysts, they believe trading CDS directly is the cleaner option and offers more potential for spread movement.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Oracle Corp. is facing a growing wave of concern in the credit markets as the cost of protecting its debt from the default state surged&#8230;<\/p>\n","protected":false},"author":5,"featured_media":1645,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[39],"tags":[1104,1095,1116,1114,1098,1101,1103,1105,1097,1093,1110,1119,1106,1099,1112,1109,1092,1100,1094,1117,1096,1102,1113,1111,1108,1118,1115,1107],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v15.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Oracle Credit Risk Rises as AI Spending Raises 2026 Concerns<\/title>\n<meta name=\"description\" content=\"Oracle\u2019s credit risk hits a three-year high as AI-driven borrowing accelerates. 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