Oracle(US:ORCL) Zhi Tong Cai Jing·2025-11-21 13:45Core Viewpoint - Concerns are rising on Wall Street regarding the high levels of debt that tech giants are incurring to build AI infrastructure, marking a shift from their previous practice of using cash reserves for capital expenditures [1][2]. Group 1: Debt Issuance and Market Reactions - The top five companies in AI spending—Amazon, Alphabet, Microsoft, Meta Platforms, and Oracle—are projected to raise a record $108 billion in debt by 2025, more than three times the average of the past nine years [2]. - Despite the surge in debt issuance, investors are currently not overly concerned about its impact on stock valuations, as the leverage ratios of these companies remain relatively low [2]. - The sudden increase in debt issuance has raised questions about the bond market's ability to absorb this influx, contributing to a significant pullback in U.S. stocks after six months of gains [2][6]. Group 2: Oracle's Debt and Financial Health - Oracle's recent issuance of $18 billion in investment-grade bonds to fund AI spending has drawn particular attention, with the company's stock experiencing a 33% drop since reaching a record high on September 10 [3][6]. - Oracle's projected capital expenditures for the current fiscal year are $35 billion, primarily for its cloud business, leading to an expected free cash flow of negative $9.7 billion [6]. - Standard & Poor's has revised Oracle's outlook to "negative" due to anticipated capital expenditures and debt issuance straining its credit profile [6]. Group 3: Broader Industry Implications - The trend of increasing debt among tech giants is indicative of a broader shift in the industry, with concerns about systemic risks arising from interconnected revenue relationships among companies with weaker balance sheets [7]. - The capital expenditure for AI is expected to rise significantly, with projections of $600 billion by 2027, up from over $200 billion in 2024 and nearly $400 billion in 2025 [8]. - Despite rising leverage, investors maintain a generally positive outlook on tech giants due to their sustained profit growth and strong competitive positions, with estimates suggesting that 80% to 90% of planned capital expenditures will come from their cash flows [8][9].