Benzinga·2026-01-05 07:21Core Viewpoint - Wall Street investors are concerned about a credit bubble in the AI sector and are using Oracle Corp. as a hedging strategy by shorting its stock [1][2] Group 1: Investment Strategy - Oracle is viewed as a "cheap proxy" for investors looking to hedge against credit risks associated with smaller AI infrastructure firms like CoreWeave [2] - The cost of hedging CoreWeave's debt directly through Credit Default Swaps has become prohibitively expensive, leading investors to use Oracle shorts instead [2] Group 2: Operational Risks - Oracle's heavy reliance on OpenAI, its largest customer, poses significant risks, especially as OpenAI reportedly loses nearly $12 billion per quarter [3][4] - If OpenAI encounters a liquidity crisis, Oracle may face operational challenges due to billions in contracted data centers that cannot be easily repurposed [4] Group 3: Financial Health - Oracle's capital expenditures have surged from $6 billion to $20 billion in the last six months, primarily funded by debt, indicating strain on its balance sheet [5] - The widening of Oracle's credit spreads suggests that bond markets are becoming increasingly cautious about the company's rapid, credit-fueled expansion [5] Group 4: Stock Performance - Oracle's stock (ORCL) has declined by 15.74% over the last six months but has increased by 18.12% over the past year, closing at $195.71 [6] - The stock maintains a weaker price trend across short, medium, and long terms, with a poor value ranking [6]