By Amanda Cooper LONDON, Dec 11 (Reuters) - The cost of insuring Oracle's debt against the risk of default has shot up after its latest earnings reignited worries about how much the broader corporate sector is spending on AI and the borrowing surge to fund it. A growing debt pile, at just ​over $100 billion, means Oracle has become a bellwether for sentiment towards AI as concern about a bubble in the sector grows with surging tech shares. Trading in ‌Oracle credit default swaps (CDS), which has explod ...

Core Insights - Saba Capital Management has sold credit derivatives to banks seeking protection against potential losses from major tech companies like Oracle and Microsoft due to concerns over debt incurred from AI investments [1][4][5] - The demand for credit default swaps (CDS) indicates a growing concern about the financial health of tech firms as they accumulate significant debt for AI projects [4][6] Group 1: Market Dynamics - Banks are increasingly purchasing CDSs as a hedge against the rising debt levels of tech companies, reflecting fears of a potential market correction if the AI investment boom turns out to be a bubble [4][5] - Saba's sale of CDSs marks the first time banks have sought this type of protection from the hedge fund, indicating a shift in market sentiment towards tech-related risks [5][6] Group 2: Pricing and Risk Assessment - Current CDS prices suggest that perceived default risks for major tech firms remain low compared to other sectors, despite the growing concerns about a potential bubble [2][6] - CDS contracts for Oracle and Alphabet are trading at their highest levels in two years, with notable increases for Meta and Microsoft in recent weeks, indicating heightened market activity in this area [7]