Oracle’s Credit Risk Hits Highest Since 2009 on Earnings

Core Viewpoint - Oracle Corp.'s credit risk has reached a 16-year high due to increased spending on data centers and equipment, raising concerns about the profitability of its artificial intelligence investments [1]. Group 1: Credit Risk and Market Reaction - The cost of protecting Oracle's debt against default for five years increased by 0.17 percentage points to approximately 1.41 percentage points per year, marking the highest level since April 2009 [2]. - The spread on Oracle's 6% bond due in 2055 widened by 19 basis points to 196 basis points, indicating a decline in investor confidence [3]. - Oracle's shares fell by 10% on Thursday, the largest intraday drop since January, reflecting market concerns [4]. Group 2: AI Investment and Debt Concerns - Oracle is heavily borrowing for artificial intelligence data centers, leading banks involved in construction loans to purchase credit default swaps to hedge their exposure [5]. - Rising leverage is negatively impacting Oracle's credit metrics, with fears that it may push the company into high-yield status [5]. - The company has over $100 billion in debt and has been burning through cash due to heavy capital expenditures [6].