Oracle CDS Costs Surge on AI Debt Risks as BTC Emerges as Safe Haven

• Credit default swaps (CDS) on Oracle have spiked, signaling trader worries about debt repayment amid massive AI investments.

• Oracle’s net debt is projected to double to $290 billion by 2028, fueling hedging activity in bonds and CDS.

• AI infrastructure spending hits $200 billion annually, but experts warn of bubble risks similar to the dot-com era, with Bitcoin rising as a hedge.

Oracle AI debt default risk rises as CDS costs soar; traders hedge against $290B debt load from AI expansion. Explore impacts on crypto safe-havens like Bitcoin. Stay informed on tech-finance shifts.

What is the Oracle AI Debt Default Risk?

Oracle AI debt default risk refers to the potential that the tech firm could struggle to repay its borrowings tied to aggressive investments in artificial intelligence infrastructure. As Oracle pours billions into data centers and partnerships like the $500 billion Stargate project with OpenAI, its debt has ballooned to $95 billion, prompting investors to buy credit default swaps for protection. This risk is amplified by surging CDS premiums, now at near five-year peaks, amid broader market skepticism about AI’s sustainability.

Credit traders have been ramping up purchases of credit default swaps (CDS) on Oracle as a hedge against potential default risks. These moves are spurred by analyses from JPMorgan and the firm’s substantial borrowing for AI expansion. The cost of insuring Oracle’s debt over the next five years has surged to near its highest level since October 2023.

The cost of insuring Oracle’s debt over the next five years has surged to near its highest level since October 2023. Source: Bloomberg

Why Are Investors Hedging Oracle’s Ballooning Debt?

Investors are showing mixed reactions to Oracle’s expanding debt obligations. Based on a Bloomberg report, credit traders are acquiring CDS to shield against the chance of Oracle defaulting on its obligations, a pattern Morgan Stanley anticipates persisting as the company directs billions toward AI development. The expense of protecting against default on this debt for the coming five years is now close to its peak since October 2023, per ICE Data Services.

Oracle’s bonds yielding 4.9%, set to mature in February 2033, have seen their spreads widen from 26 basis points to 83 basis points in recent trading. Morgan Stanley forecasts that by fiscal 2028, Oracle’s adjusted net debt could more than double to approximately $290 billion from its current $100 billion level. Analysts from the firm recommend that Oracle investors consider five-year CDS and bonds for protection.

“Near-term credit deterioration and uncertainty may drive further bondholder and lender hedging,” stated Morgan Stanley analysts Lindsay Tyler and David Hamburger in a recent note.

While not obligatory, this guidance has stirred investor activity to protect positions. Banks are preparing a $38 billion debt issuance to support data centers, marking the largest AI-related financing in the market. This funding targets facilities in Texas and Wisconsin, aligning with Oracle’s $500 billion AI infrastructure commitment through the Stargate initiative with OpenAI.

Nicholas Elfner, co-head of research at Breckinridge Capital Advisors, foresees dynamic secondary market activity as major issuers rapidly expand debt and gain prominence in indices. “Index trackers may add to the name to maintain their weight,” he noted. “Others with a negative credit view may buy CDS protection to hedge holdings or make a bet on spread widening.”

With $95 billion in outstanding debt, Oracle ranks as the largest non-financial corporate issuer in the Bloomberg high-grade index. Market participants and experts align on the CDS uptick and debt projections from Morgan Stanley, though some downplay default threats, citing strong cash flows from cloud and AI contracts.

Are AI Bubble Concerns Fueling Oracle’s Debt Worries?

The AI-driven market surge has dominated U.S. stocks in 2025, propelling the S&P 500 and Nasdaq to repeated record highs in October, with the S&P crossing 6,000 for the first time due to tech momentum and AI productivity hopes. Annual AI infrastructure outlays are expected to reach $200 billion, countering challenges like inflation and global tensions. Consequently, the Nasdaq has significantly outperformed, with technology comprising over 30% of the S&P 500.

Yet, doubts are growing among analysts and investors, evoking memories of the early 2000s dot-com bust. AI stocks have accounted for over 60% of the S&P’s year-to-date advances, with elevated valuations and rising venture capital in revenue-lacking AI ventures since 2023. Firms such as Goldman Sachs and JPMorgan highlight potential shifts from AI leaders if earnings falter, even as assets like gold and Bitcoin climb alongside equities, indicating prudent investor caution.

Jeremy Grantham, co-founder of GMO and a seasoned asset manager known for predicting bubbles like the 2000 dot-com crash and 2008 crisis, has termed AI a “bubble waiting to pop.” He draws parallels to the 19th-century British railroad mania, which collapsed after excessive infrastructure hype. Grantham cautioned that although AI could foster long-term gains, “like any world-changing technology [it] will eventually crash and hurt investors.”

Similar views come from David Solomon, CEO of Goldman Sachs, Amazon’s Jeff Bezos, and Sam Altman, who in October 2025 advised that “people will overinvest and lose money” in the AI boom. These warnings underscore the pressures on companies like Oracle, where AI ambitions intersect with crypto’s role as a hedge.

Frequently Asked Questions

What Are Credit Default Swaps and How Do They Relate to Oracle’s AI Debt?

Credit default swaps are financial derivatives that act as insurance against a borrower’s default. For Oracle’s AI debt, traders buy CDS to protect against repayment failures amid the company’s $500 billion infrastructure spending. Premiums have risen sharply, reflecting concerns over debt doubling to $290 billion by 2028, as noted by Morgan Stanley.

Is Bitcoin a Safe Haven Amid Oracle’s AI Investment Risks?

Yes, Bitcoin has emerged as a safe-haven asset, surging alongside gold as investors hedge against AI sector uncertainties like Oracle’s debt expansion. With AI driving market highs but bubble fears persisting, Bitcoin’s performance offers diversification from tech volatility, appealing to those wary of overinvestment in AI infrastructure.

Key Takeaways

• CDS Surge on Oracle: Traders are buying more credit default swaps as insurance costs hit near five-year highs, driven by AI debt growth to $290 billion.
• AI Infrastructure Boom: Oracle’s $38 billion debt deal funds data centers for the $500 billion Stargate project with OpenAI, amplifying default hedging needs.
• Bubble Risks and Hedges: Experts like Jeremy Grantham warn of an AI crash; investors turn to Bitcoin for protection against tech overvaluation.

Conclusion

The Oracle AI debt default risk highlights growing tensions in the tech sector’s AI push, with CDS activity and expert analyses from Morgan Stanley and JPMorgan underscoring debt vulnerabilities. As secondary concerns like AI bubble warnings from figures such as Jeremy Grantham gain traction, safe-haven assets including Bitcoin provide crucial buffers. Investors should monitor Oracle’s cash flows and broader market rotations closely for informed strategies ahead.