To The Moon

I am watching the doubling of Oracle's Credit Default Swap (CDS) spreads with significant concern, as it clearly signals a palpable rise in perceived risk regarding the company's enormous gamble on the Artificial Intelligence infrastructure buildout. The surge in the cost of insuring Oracle's debt to its highest level in two years—or even three, depending on the data source—is a direct reflection of investor anxiety over the multi-billion-dollar debt Oracle is taking on. This aggressive borrowing spree, with net adjusted debt potentially tripling by 2028, is a high-stakes strategy to challenge giants like Microsoft $Microsoft(MSFT)$   and Amazon $Amazon.com(AMZN)$   in the cloud and AI race. The credit market is now using Oracle's CDS as a critical hedging tool, or even a shorting mechanism, against a potential collapse in the broader AI sector.

Will Oracle continue to decline? The stock has already fallen steeply from its high of $345 to $198, losing a significant portion of its year-to-date gains despite still being up 20% YTD. This correction is a stark warning that equity investors are paying attention to the credit market's jitters. The fear is rooted in the low profitability and thin margins of Oracle's AI-focused cloud division, which has reportedly struggled to generate cash flow that can comfortably support the massive capital expenditures required for the AI infrastructure. Essentially, the market is pricing in the risk that the reward from this massive AI bet will not materialize fast enough to cover the surging debt load.

The core of the issue, as I see it, is the nature of Oracle's AI strategy compared to its peers. The question of whether the "OpenAI bubble will ultimately be paid for by Oracle" is incredibly pointed. Other major tech companies issuing debt, like Microsoft and Alphabet $Alphabet(GOOGL)$  , have well-established, profitable AI businesses and stronger balance sheets to absorb the costs of this infrastructure arms race. In contrast, Oracle, with its relatively lower investment-grade credit rating and history as a slower-moving database giant, is seen as having its fate too closely tied to the capital-heavy, long-payback-cycle AI buildout, which includes high-profile deals like the massive $300 billion arrangement with OpenAI. This makes its credit profile disproportionately sensitive to any loss of confidence in the AI narrative.

If investor confidence in the AI market wavers further, I anticipate Oracle's CDS spreads will indeed rise even more steeply, confirming its role as the credit market's barometer for AI risk. A lack of clear evidence that Oracle can quickly improve the thin margins of its cloud unit, convert its order backlog into meaningful profits, and ease its debt-to-equity ratio will keep both credit and equity under severe pressure. The decline from the $345 peak suggests that the market is already recalibrating its expectations, moving away from pure enthusiasm toward a hard assessment of execution risk and financial sustainability.

Ultimately, I believe Oracle's $Oracle(ORCL)$   stock is highly susceptible to further volatility and potential decline until I see concrete proof of profitability in its AI-driven cloud business. The massive scale of its debt-funded AI investment, while ambitious, makes it vulnerable to being viewed as the weak link in the AI complex. The increase in CDS is not just about default risk—which remains low for an investment-grade company—but about the higher cost of borrowing and the pressure on the balance sheet that can weigh down the stock price. The next earnings report and any updates on cloud margins will be critical in determining if the stock will find a floor or continue to wipe out more of its recent gains.

As a retail investor, I focus mainly on the US and Singapore markets, combining a mix of technical trading and long-term investing strategies. I enjoy analyzing charts, spotting patterns, and making calculated moves based on both market sentiment and fundamentals. While I'm not a professional, I treat my portfolio seriously and continue to learn and grow with each trade. If you're also navigating the markets and enjoy discussing stocks, options, or market trends, feel free to follow me. Let's learn and grow together as a community.

@Tiger_comments  @TigerStars