Oracle slides as traders sour on the recently anointed AI darling
Oracle is getting hit hard as investors question the durability of the AI boom.
Since the stock hit an all-time high in September, powered by the company’s $300 billion deal with OpenAI, shares are down about 40%.
And it’s not just the company’s share price that’s reflecting investors’ newfound jitters.
Volume in the market for credit default swaps — essentially a kind of insurance against a company defaulting on its debts — is surging as the company has supercharged its borrowing to finance its AI ambitions, Bloomberg’s Caleb Mutua reports:
“The price to protect against the company defaulting on its debt for five years tripled in recent months to as high as about 1.11 percentage point a year on Wednesday, or around $111,000 for every $10 million of principal protected, according to ICE Data Services.
As AI skeptics rushed in, trading volume on the company’s CDS ballooned to about $5 billion over the seven weeks ended Nov. 14, according to Barclays Plc credit strategist Jigar Patel. That’s up from a little more than $200 million in the same period last year.”
The activity in the Oracle CDS market underscores continued focus from investors on the risks associated with AI, even after Nvidia’s knockout earnings results Wednesday and efforts to quell persistent questions about an AI bubble.
Such concerns seem to have gotten the better of the market yesterday, with the S&P 500, after being up almost 2%, reversing hard back into the red. Today, markets are being propped up, in part, by a key Fed official's comments supporting a "near term" rate cut.
Volume in the market for credit default swaps — essentially a kind of insurance against a company defaulting on its debts — is surging as the company has supercharged its borrowing to finance its AI ambitions, Bloomberg’s Caleb Mutua reports:
“The price to protect against the company defaulting on its debt for five years tripled in recent months to as high as about 1.11 percentage point a year on Wednesday, or around $111,000 for every $10 million of principal protected, according to ICE Data Services.
As AI skeptics rushed in, trading volume on the company’s CDS ballooned to about $5 billion over the seven weeks ended Nov. 14, according to Barclays Plc credit strategist Jigar Patel. That’s up from a little more than $200 million in the same period last year.”
The activity in the Oracle CDS market underscores continued focus from investors on the risks associated with AI, even after Nvidia’s knockout earnings results Wednesday and efforts to quell persistent questions about an AI bubble.
Such concerns seem to have gotten the better of the market yesterday, with the S&P 500, after being up almost 2%, reversing hard back into the red. Today, markets are being propped up, in part, by a key Fed official's comments supporting a "near term" rate cut.