Morgan Stanley Warns Oracle Debt Risk Could Hit 2008 Crisis Levels

Core Viewpoint - Oracle Corp is facing increasing credit risk as it aggressively borrows to fund its AI data-center expansion, raising concerns about its financial stability [1][5][7]. Financial Metrics - The cost to insure Oracle's debt against default has surged to 125 basis points, the highest in three years, with potential to reach 200 basis points if investor anxiety continues to grow [2][6]. - Oracle has raised $18 billion in bonds this year and has approximately $56 billion in project and construction financing for AI data-center buildouts, marking the most capital-intensive infrastructure effort in its history [4]. Analyst Sentiment - Morgan Stanley analysts have shifted from a bullish bond stance to advising against lending to Oracle, suggesting investors should consider buying credit default swap (CDS) protection instead [3]. - The firm highlights a widening funding gap and rising leverage risk, indicating that Oracle may be investing in technology that could become obsolete before it generates returns [5]. Market Reaction - The credit market is signaling that funding Oracle's AI ambitions is costly, with expectations that CDS spreads could exceed 150 basis points in the near term, potentially reaching levels seen during the 2008 financial crisis [6]. - Investors are currently hedging against uncertainty, indicating that Oracle must demonstrate that its AI investments will not jeopardize its balance sheet [7].