Hold steady in the "money-burning" battle! Oracle(ORCL.US) earnings report eases AI spending fears, CDS prices plummet to a one-month low

On Wednesday, after the database giant Oracle (ORCL.US) released its latest quarterly earnings report, easing market concerns over its AI-related capital expenditures, its key credit risk indicator saw the largest improvement since February 2.

According to ICE Data Services, Oracle’s five-year credit default swap (CDS) cost decreased by up to 0.054 percentage points to a one-month low of 1.52%. Generally, as investor confidence in a company’s credit quality improves, CDS prices tend to decline.

Thanks to strong sales performance and an outlook indicating that AI computing demand remains robust, Oracle’s stock rose about 10% in pre-market trading on Wednesday.

Previously, the company’s massive investments in AI drew increasing attention from investors worried about an AI bubble. In the last quarter, Oracle’s capital expenditure was approximately $18.6 billion, well above analysts’ expectations of $14 billion. However, the company maintained its full-year financial forecast of $50 billion.

Analysts Robert Schiffman and Alex Reid noted in their Tuesday report that Oracle’s solid performance and optimistic outlook effectively reassured market sentiment. However, they also mentioned that due to ongoing concerns, Oracle’s bonds and CDS prices “remain significantly higher than peers.”

Last month, Oracle raised $25 billion in the U.S. high-grade market and announced plans to refinance another $25 billion in the equity market, easing investor worries about its balance sheet pressure. Market expectations are that Oracle will not issue new bonds this year.

To fund AI projects, large cloud service providers are issuing bonds at an unprecedented pace, raising concerns that excessive bond supply could pressure this market, which has historically traded at a premium over U.S. Treasuries.

Amazon (AMZN.US) issued $37 billion in bonds on Tuesday, setting a record for non-M&A investment-grade bond issuance. Coupled with euro-denominated bonds issued on Wednesday, Amazon’s current financing round will total nearly $50 billion.

Analysts expect that the six largest global cloud service providers’ capital expenditures could exceed $750 billion this year, an increase of over 80% compared to 2025.