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“Every morning the opening screen of my Bloomberg is what’s going on with the CDS spread Oracle debt,” Morgan Stanley Wealth Management CIO Lisa Shalett SPOKE luck in Octoberseems to speak for a market increasingly concerned about the bursting of an artificial intelligence (AI) bubble. CDS, as students of the 2008 financial crisis know, stands for “credit default swap,” a financial instrument to hedge against large debt loads elsewhere in the market. And the reason Shalett highlighted Oracle CDS is because the software giant founded by Larry Ellison stands out as a relative anomaly among the “hyperscaler” companies that are fueling billions in data-center investments due to excessive debt.
When people start to worry about Oracle’s ability to pay,” Shalett said luck“It’s going to be an early sign to us that people are nervous.”
That’s why Bank of America Research wrote on Tuesday that “the lack of clarity in borrowing hyperscaler is the main risk going into 2026,” and why a press release from Oracle on Sunday carries a lot of weight, not only for Oracle investors but for the entire AI business.
The financing plan for 2026 was announcedOracle said it hopes to raise $45 billion to $50 billion in gross revenue, and plans to achieve this funding goal by “using a balanced combination of debt and equity financing to maintain a strong investment-grade balance sheet.” The most important bit, according to BofA Situation Room analysts Yuri Seliger and Sohyun Marie Lee, is that Oracle is planning for a bond deal to cover its debt borrowing needs for the entire year, after it priced $25 billion in bonds on Monday.
“This transparency of the timing and the amount of Oracle supply is supportive for the wider market,” the analysts wrote, given how nervous the credit markets and analysts like Lisa Shalett have been through the back half of 2025. This announcement “chips away at hyperscaler supply risks” by providing complete certainty of the timing and magnitude of Oracle’s market participants. The equity market didn’t exactly agree.
A Catalyst for Strength
By setting its borrowing limit high, BofA argued that Oracle is turning a potential supply glut into a supportive signal for the broader high-grade market. The positive ripple effects are visible almost immediately, with BofA noting that bonds for the associated hyperscaler Meta traded about 3 basis points tighter on Monday after.
BofA suggests it sets a positive precedent for the sector. Future bond deals from other tech giants are likely to act as positive market catalysts rather than disruptors. For a new deal to act as a negative catalyst today, supply must be greater than aggressive expectations, a scenario that analysts view as challenging, as the market is already pricing in up to $300 billion in hyperscaler supply.
There’s just one problem with this thesis: what happened to Oracle stock after Monday—and so far on Tuesday. The reason why much has been said about the importance of corporate communication in this phase of the AI hyperscaler trade.
The OpenAI conundrum
The positive vibes from Oracle’s Sunday press release were erased—and more—by a tweet from the company.
“The Nvidia-OpenAI deal has no impact on our financial relationship with OpenAI,” the company said posted on X at noon. “We remain very confident in OpenAI’s ability to raise funds and meet its commitments.” The stock immediately bounced back, erasing a nearly 2% gain and trading up 2% instead, before extending its fall on Tuesday, down more than 3%.
Oracle struggles to do this. The stock is down nearly 12% in just five days, and has lost more than half of its value since hitting a high in September. The investors punish the company because of an increasingly uncontrollable balance sheet: Oracle already carries nearly $100 billion in debt, with plans to take on another $50 billion to finance what it has seen as the crown jewel of its AI strategy: massive data centers built to serve OpenAI.
So far, that strategy has proven difficult to turn into pure growth.
For one, demand is outstripping supply. Oracle said data-center expansion is running into labor and equipment shortages, delaying some construction and further pushing future earnings. “The world of bits moves fast. The world of atoms doesn’t,” data-center expert James Koomey once said Fortune. “And data centers are where the two worlds collide.”
Second—and more troubling for investors—Oracle is increasingly exposed to one and more unsavory customers. A significant portion of the data centers are being built for OpenAI, a private company with over $1 trillion in liabilities and only around $20 billion in revenue. Investors are starting to question how OpenAI can grow its revenue without continuous, multiple rounds of funding, and because the company is private, the markets don’t have any of the transparency they usually demand from a systemically important entity.
That concern spilled over into the public markets. Microsoft shares fell 12% after the company disclosed that 45% of its future cloud growth is tied to OpenAI, while Nvidia has slid in recent days amid reports that its expected $100 billion OpenAI investment may be smaller than expected.
However, the risks are more significant for companies that are already gaining the leverage to meet the demand driven by OpenAI. Oracle has nearly $250 billion in long-term leasing commitments tied to data centers with lifespans of 15 to 20 years, most of which it expects to sublease for shorter periods. If demand slows, or capital gets tight, Oracle could be left holding on to debt before the cash comes in.
