Oracle’s Credit Risk Drops to One Month-Low After Strong Results
TL;DR
Oracle's credit risk dropped to a one-month low after strong quarterly results eased AI spending fears. Shares surged premarket as sales and outlook reassured investors, despite high capital expenditures.
Tags
A key gauge of Oracle Corp.’s credit risk improved the most since Feb. 2 on Wednesday, after the database giant’s quarterly report helped ease investor fears about AI-related capital spending.
The cost of protecting the company’s debt against default for five years fell as much as 0.054 percentage point to a one-month low of 1.52 percentage points, according to ICE Data Services. Credit default swap prices usually falls as investor confidence in a firm’s credit quality improves.
The company reported strong sales and an upbeat outlook
Oracle shares jumped some 10% premarket as it reported strong sales and issued an outlook that suggests little letup in demand for AI computing.
The firm’s big spending on artificial intelligence has attracted the attention of investors who’ve grown increasingly concerned about an AI bubble. Last quarter’s capital expenditures were about $18.6 billion, well above the $14 billion anticipated by analysts. But Oracle maintained its fiscal-year forecast of $50 billion.
Its solid results and upbeat outlook helped calm investors, Bloomberg Intelligence analysts Robert Schiffman and Alex Reid wrote in a note Tuesday. Still, Oracle’s bonds and credit-default swaps “remain well wide of peers as concerns persist,” the added.
AI Bubble Fears Are Creating New Derivatives: Credit Weekly
Oracle last month raised $25 billion in the US high-grade market and said it planned to raise a further $25 billion in the equity market — helping reassure investors that the company wouldn’t strain its balance sheet too much. The firm isn’t expected to issue more debt this year.
Hyperscalers are tapping debt markets at an unprecedented pace to finance artificial intelligence projects, stoking investor concerns that too much supply will put pressure a market that trades at a historically low premium to Treasuries.
Amazon.com Inc. was in the market Tuesday with a $37 billion bond sale, a record investment-grade deal not tied to an acquisition. The firm’s capital raising is set to swell to nearly $50 billion with Wednesday’s euro-note deal.
The BI analysts expect the six largest hyperscalers’ capital spending to potentially top $750 billion this year, more than 80% higher than in 2025.