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Markets are getting more concerned about Oracle’s AI data center debt

The price of insuring against Oracle defaulting on its growing debt load has spike massively since September.

After a respite Monday, AI bears are back in control Tuesday.

Bellwethers like Advanced Micro Devices and Nvidia are getting battered on reports of a brewing collaboration between Alphabet and Meta on chips. And that partnership’s potential threat to OpenAI and some of those who’ve inked deals with the AI startup giant — as investors, customers, suppliers, and sometimes all three! — is causing some jitters out there.

Meanwhile, concerns about all that borrowing that companies have planned or done to finance the giant AI data center build-out boom that’s currently underway continue burbling away in the bond markets. As we’ve mentioned, the price of insuring against a debt default by Oracle has become a closely watched expression of worries about the AI boom.

While some of those concerns seemed to relent earlier today, resulting in a slight reduction in prices for this bond insurance — known as credit default swaps — on Oracle debt, it’s worth pointing out that the concerns also seem to have spread a bit even to companies that have far sturdier financials than Oracle.

And despite today’s dip, the cost to protect against an Oracle default has surged massively in recent weeks.

For instance, according to FactSet data, Microsoft and Meta have also seen prices of insuring against their own default creep higher recently, along with Amazon.

To be clear, the price for insuring Oracle debt is a lot higher than for these other hyperscalers — likely a reflection of the massive amounts of cash the market expects Oracle to burn for the foreseeable future. Furthermore, it shouldn’t be surprising to see markets reflect rising risks for even blue chips like Microsoft as they take on more debt and commit to years of large capital expenditures for a still developing, new technology.

That stunning acceleration in Wall Street’s estimates for Oracle’s cash burn is likely driving the rapid rise in the cost of Oracle CDS. Investors went from thinking that Oracle would generate $25 billion in free cash flow in 2028 to expecting the company to burn $25 billion 2028.

While recently, increased investments in anything AI-related have seemed to push stocks up, that this historical reversal has led not just to more expensive CDS but a slumping share price signals a rise in maybe not skepticism, but at least realism in the market when it comes to the AI boom.

Luke Kawa

55m

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Luke Kawa4h

It sucks to be close to OpenAI right now

There’s a common thread between what’s ailing some different parts of the AI trade right now:

A high-profile relationship with OpenAI is a millstone around your neck. The ChatGPT maker is seemingly getting bested by Google’s Gemini 3 (and knows it) while burning a lot of cash, with no end to the red ink in sight.

Such millstone-afflicted parties include:

Investing conglomerate SoftBank has tumbled 9.9% and 10.8% in its two most recent trading days in Japan. SoftBank is a useful way to express a view on how OpenAI is doing because the Masayoshi Son-led firm is poised to own about 11% of the company, and increases in its valuation have been a big driver of SoftBank’s growth in net income. SoftBank sold its entire $5.8 billion stake in Nvidia in October, likely to finance what it owes OpenAI to build its position in that privately held company.
Oracle has the dubious distinction of getting battered across two different asset classes thanks to OpenAI. Remember: traders loved Oracle’s massive cloud-revenue backlog in the abstract. When the specifics were revealed and much of that sales pipeline was down to a $300 billion deal with OpenAI, that was when the stock peaked. More recently, credit default swaps tied to Oracle’s debt have also widened significantly, as the company’s infrastructure build-out is launching to fulfill demand from OpenAI, a customer that’s considered to be significantly less creditworthy.
The AI chip business of Advanced Micro Devices had a major breakthrough in October, securing a deal to sell multiple generations of its flagship GPUs for “tens of billions” in revenue. But... OpenAI was once again the customer. This was quickly followed by a separate announcement that 50,000 of its AI chips would be deployed in data centers run by Oracle starting in the second half of next year, likely de facto representing a further enmeshing of its relationship with OpenAI.
Microsoft has a tighter partnership with and bigger equity position in OpenAI than SoftBank. On the other hand, it also has its own successful core business, which significantly dilutes any OpenAI “signal,” so to speak. It’s the second-worst publicly traded hyperscaler in November, down almost double digits and trailing only Oracle.

Max Knoblauch4h

Ukraine peace talks send oil prices down, boosting major airline stocks

Oil prices are tanking on Tuesday, with West Texas Intermediate crude futures down about 2.8% amid reports that Ukraine has agreed to the framework of a possible peace deal with Russia.

A Kyiv official told Reuters that Ukrainian President Zelenskyy could visit the US to finalize the agreement in the next few days.

When crude falls, airlines tend to take off, and Tuesday’s market movements are sticking to that trend. Shares of major US airlines surged on oil’s price action, with discount carriers JetBlue, Southwest Airlines, and Frontier seeing the largest gains. The remaining members of the big four also rose, with United Airlines, American Airlines, and Delta Air Lines all up as well.

Nia Warfield4h

Retailers on the move as Q3 results roll in ahead of Black Friday

Mall retailers were making moves Tuesday as Q3 earnings poured in ahead of Black Friday, with several chains lifting their full-year guidance on stronger consumer demand into the holiday season. Black Friday traffic is projected to hit record levels this week as deal-hungry shoppers hunt for bargains. Macy’s also popped on the back of the strong results from peers.

Kohl’s soared after hiking its full-year outlook again, and now expects a sales decline of 3.5% to 4% versus previous estimates of a 5% to 6% decline as the retailer rolls out more coupons.
Abercrombie & Fitch jumped after raising its full-year revenue outlook, helped by stronger sales at Hollister that are expected to last through the holiday season.
Best Buy also topped Q3 expectations and raised its 2026 earnings-per-share and revenue outlook, as management expects holiday discounts to drive big tech upgrades.
Burlington Stores was a weak spot among the group despite also posting an EPS beat, as revenue narrowly missed expectations and management pointed to early-quarter softness due to “unseasonably warm temperatures.”