Investors are raising the cost of insurance against an Oracle default. Oracle bonds sit near junk territory as AI market sentiment cools. CoreWeave’s debt and equity also fell sharply last week. Oracle remains investment-grade while CoreWeave is already junk-rated. Oracle’s five-year CDS spread hit 295 basis points after briefly reaching 300. That spread is now in line with BB and B high-yield credit. Oracle’s rating is BBB-, the lowest investment-grade level. S&P downgraded Oracle in July over rising infrastructure credit risk. S&P cited weaker expected operating cash flow in 2027. Oracle has issued $118 billion in long-term debt for AI data centers. It also faces $39 billion in capital and lease obligations. Analysts forecast negative free cash flow of $23.7 billion this year. They expect -$36 billion in 2027.
What changed
Oracle CDS spreads were far lower and aligned with investment-grade peers.
What it unlocks
Investors can now price Oracle debt risk closer to junk-bond levels.
- 295 basis points for Oracle 5-year CDS
- 287% rise in Oracle CDS in one year
- $300B Oracle-OpenAI deal
- $118B Oracle long-term debt
Sources