Chamath Palihapitiya's Nervous 'Gulp' A Sign Of Things To Come? Oracle's Credit Default Swaps Surge Past COVID-19 Levels

Investor Chamath Palihapitiya highlighted Oracle Corp.’s (NYSE:ORCL) surging credit default swaps, hinting at growing unease in credit markets over the debt-fueled AI infrastructure push.

CDS Rates Surge Past COVID-19 Levels

On Tuesday, in a post on X, Palihapitiya shared a chart showing Oracle’s CDS had surged to 160 basis points, which reflects the rising annual cost of insuring the company’s debt against default.

Palihapitiya just said “gulp” in his post, while pointing out that the company’s CDS spreads have seen similar spikes ahead of major crises. Such as the COVID-19 pandemic in 2020, before which spreads touched 120 basis points, which it has now surpassed.

This marks the company’s second-highest reading in nearly two decades, trailing only the spike seen ahead of the 2008-09 financial crisis, when it reached its highest ever at 197.80 basis points.

The current surge comes amid mounting concerns regarding Oracle’s debt and broader fears of an AI bubble, leading investors to demand more compensation to take on the credit risk.

The company recently raised $15 billion via bond sales, just weeks after signing multi-billion-dollar deals with ChatGPT-parent OpenAI and Meta Platforms Inc. (NASDAQ:META), while carrying $131.73 billion in total debt on its books, and $19.77 billion in cash, during its recent fiscal second-quarter results.

Oracle did not immediately respond to Benzinga’s request for a comment. This story will be updated as soon as we receive a response.

Oracle Shares Plunge

Shares of Oracle plunged 4.13% on Tuesday, closing at $174.90, amid growing AI spending scrutiny, with the stock down 10.63% so far this year and 46.49% since its all-time high in September last year.

The stock scores poorly on Momentum and Value in Benzinga’s Edge Stock Rankings, with an unfavorable price trend in the short, medium and long terms.

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