Morgan Stanley has warned that Oracle’s credit default swap (CDS) spreads reached a three-year high of 125 basis points in November and could climb to as much as 200 bps — a level approaching the peak of the 2008 global financial crisis — if the company does not clarify how it plans to finance rapidly escalating infrastructure spending related to artificial intelligence, Yahoo Finance reports.
Oracle’s shares have fallen about 40% since their September peak, and analysts point to several mounting risks: a widening funding gap, a dramatic expansion of the balance sheet — which is projected to surge from $100 billion to $290 billion by fiscal year 2028 — and the danger of lagging behind industry leaders in key AI technologies.
Morgan Stanley has also revised its recommendation, advising investors to purchase standalone credit protection (CDS) rather than combining it with the company’s bonds, as was previously suggested. This shift reflects a sharp increase in CDS market activity, driven largely by banks hedging construction loans for data centers linked to Oracle. Total CDS trading volume reached $5 billion over the past seven weeks, compared with just $200 million a year earlier.
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Source: ceo.com.pl
