Credit traders are rising to the sky their purchases of Oracle's credit default swap (CDS) to hedge against default risk, as the company’s debt insurance costs have reached nearly the highest levels since October 2023. Under the recommendations of JPMorgan and Morgan Stanley, investors are reacting to Oracle's significant borrowing to expand its AI infrastructure, including a bond issuance package of 38 billion USD to build data centers in Texas and Wisconsin.
Morgan Stanley forecasts that Oracle's net debt could rise to the sky 290 billion USD by 2028—almost three times the current amount—and advises investors to buy CDS and 5-year bonds. Although some believe that the risk of default is low due to strong cash flow, many experts warn that the AI bubble could burst, similar to past investment frenzies.
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