To The Moon

UBS Group indicated that although Oracle Corporation (ORCL.US) has taken on tens of billions in debt to expand its artificial intelligence operations, the investment-grade rating of its bonds is highly likely to be maintained in the near term. Strategist Matthew Mish stated in a Tuesday interview that while the software giant's rating could potentially be lowered by one notch to the lowest tier of investment grade, market fears of a descent into "junk" status are probably overblown. He added that investors have already priced in much of the credit risk, and rating agencies are expected to show "some patience" with Oracle based on its business outlook. "We do not view a downgrade to junk in the first quarter as the base case; in fact, we see it as highly unlikely," Mish remarked. Concerns about the sustainability of its rating have simmered since Oracle issued $18 billion in bonds last September to fund data center expansions aimed at capitalizing on the AI investment boom. The risks associated with its rising debt have prompted some investors to purchase credit default swaps (CDS) linked to Oracle, pushing the prices of some of these derivatives to their highest levels since the global financial crisis by last December. Oracle's current outstanding debt stands at approximately $95 billion, making it the largest corporate issuer outside the financial industry within the Bloomberg High-Grade Corporate Index. Mish emphasized that Oracle's ability to retain its investment-grade status will ultimately hinge on its AI business prospects and its future borrowing plans. Currently, all three major rating agencies assign Oracle a rating that is two notches above junk status. Oracle declined to comment. The company's Co-CEO, Clay Magouyrk, explicitly stated during an earnings call last month that the company is committed to maintaining its high-grade debt status. Representatives from Moody's, S&P Global Ratings, and Fitch did not immediately respond to requests for comment.