But now, some investors are worried because Oracle is using a lot of borrowed money for this expansion.
The company’s Credit Default Swap (CDS) spread has reached a record 212 basis points.
At the same time, Oracle’s stock price has fallen close to its lowest level in a year. The shares are trading around $116.71, just above the 52-week low of $116.01, after losing nearly 52% in the past year.
What is CDS spread?
A Credit Default Swap (CDS) is like an insurance policy for a company’s debt.
Suppose an investor lends money to Oracle by buying its bonds. If the investor fears that Oracle may not be able to repay the money, they can buy a CDS for protection.
The cost of this protection is called the CDS spread.
So, if an investor wants to protect $10 million worth of Oracle bonds, they would have to pay around $212,000 every year for insurance against Oracle failing to repay its debt.
When the CDS spread goes up, it means investors feel there is a higher chance of the company facing problems in repaying its debt.
Which companies have seen their CDS spreads?
By July 22, five companies, Alphabet (Google’s parent company), Amazon, Meta, Microsoft and Oracle, had raised nearly $302 billion from financial markets.
According to Axios, Meta had the highest perceived credit risk among major tech companies, with its five-year CDS spread at around 0.87 percentage points.
Amazon and Alphabet followed at about 0.65 percentage points, while Microsoft stood at 0.51 percentage points and Apple had the lowest spread at around 0.35 percentage points.
AI-related borrowing already crossed estimates
A Goldman Sachs report found that companies globally have raised around $489 billion in AI-related debt and loans this year so far. This is much higher than its earlier estimate of $322 billion for the entire year of 2025, according to Axios.
Japan’s Nikkei recently reported that major AI companies may have around $1.65 trillion in “hidden debt.”
Alphabet also raised concerns among some investors after reporting its first quarter of negative free cash flow since becoming a public company in 2004.
Will AI investments pay off?
Tech companies are spending billions on AI because they believe it will become a major source of future profits. But the rise of cheaper and powerful Chinese AI models has made investors question whether these huge investments will actually bring enough returns.
