Morgan Stanley warns Oracle's credit protection is nearing its high

A gauge of risk on Oracle Corp.'s debt reached a three-year high in November, and things are only going to get worse in 2026 unless the database giant is able to assuage investor anxiety about a massive artificial intelligence spending spree, according to Morgan Stanley.

- BY CALEB MUTUA

DAVID PAUL MORRIS Bloomberg

ORACLE'S five-year credit default swaps price is at risk of setting a record. Above, in Redwood City, Calif.

A funding gap, swelling balance sheet and obsolescence risk are just some of the hazards Oracle is facing, according to Lindsay Tyler and David Hamburger, credit analysts at the brokerage. The cost of insuring Oracle Corp.’s debt against default over the next five years rose to 1.25 percentage points a year Tuesday, according to ICE Data Services.

The price on the five-year credit default swaps is at risk of toppling a record set in 2008 as concerns over the company’s borrowing binge to finance its AI ambitions continue to spur heavy hedging by banks and investors, they warned in a note Wednesday.

The credit default swaps could break through 1.5 percentage points in the near term and could approach 2 percentage points if communication around its financing strategy remains limited as the new year progresses, the analysts wrote. In 2008, Oracle’s credit default swaps hit a record 1.98 percentage points, ICE Data Services shows.

A representative for Oracle declined to comment.