Oracle’s Credit Markets Flash Red While the Stock Tries to Recover
Published on 07/22/2026 at 03:51 | Redaktion boerse-global.de
Oracle’s share price clawed back some ground on Tuesday, rising 4.77 percent to close at €111.54 — but the real action is unfolding in the bond market, where the cost of insuring the company’s debt against default has smashed through all previous records. The five-year credit default swap spread hit 2.03 percentage points this week, a level not seen since the 2008 financial crisis, according to ICE Data Services. That marks a fresh all-time high, edging past the prior record of 198.18 basis points set on March 27.
The spike follows S&P Global’s decision earlier this month to downgrade Oracle’s credit rating to BBB-, leaving the company just one notch above junk status. With roughly $117 billion in bonds sitting in the US investment-grade index, any further deterioration would ripple well beyond Oracle’s own balance sheet.
The $7 Billion Price Tag of a Downgrade
The rating cut is already having real-world consequences. Regulators in Wisconsin are reportedly demanding that Oracle post a $7 billion security deposit for its planned gigawatt-scale data center in Port Washington. The trigger: the company’s rating fell below the A- threshold. It’s a vicious cycle — Oracle needs to borrow heavily to build the infrastructure that justifies its valuation, but each new borrowing round pressures the rating further, making the next project even more expensive.
That dynamic is laid bare in the numbers for fiscal 2026. Capital expenditures are running at $55.7 billion, while free cash flow has plunged to negative $23.7 billion. The “Cloud at Customer” strategy is burning capital at a pace Oracle has never experienced before.
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A $638 Billion Backlog With One Dominant Client
Demand, at least on paper, remains staggering. Oracle’s remaining performance obligation — the backlog of contracted but unfulfilled business — stands at $638 billion, a 363 percent year-over-year surge fueled by the AI boom. But roughly half of that total is tied to a single partner: OpenAI. That concentration has made Oracle the primary beneficiary of the generative AI wave, but it also leaves the company dangerously exposed if the sector cools.
There are already signs of strain. Reports that OpenAI may miss its own long-term revenue targets have weighed heavily on Oracle’s stock, which has fallen 27.36 percent over the past 30 days. The shares now trade 60.26 percent below the 52-week high of €280.70 reached in September 2025.
Michael Burry’s Partial Cover-Up Sends Mixed Signals
Hedge fund manager Michael Burry waded into the debate over the weekend, dismissing reports that he had fully closed his short position against Oracle as “fake news.” On X, he explained that he had covered half of his Oracle put options — those expiring in January 2027 with strike prices in the low-to-mid triple-digit dollar range — because the position had become “too big” and he was sitting on a profit. “I don’t fall in love with option trades that are working,” he wrote. The remaining half stays in place.
Burry’s bearish thesis centers on Oracle’s aggressive AI infrastructure spending, questionable financing methods, and heavy customer concentration with OpenAI. The S&P downgrade now gives that thesis institutional validation. Yet retail investors on Stocktwits interpreted Burry’s clarification as a bullish signal, rating sentiment around Oracle as “extremely bullish” despite the hedge fund manager’s continuing short bet.
Dilution Looms as the Cash Sink Deepens
The credit market jitters are directly tied to Oracle’s capital-intensive AI buildout. The company has announced plans for an additional $20 billion equity issuance in 2026. Placing new shares at a price well below last year’s highs would dilute existing shareholders significantly.
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The scale of spending explains the concern. In the fiscal year ending May, Oracle poured $55.7 billion into capital investments, up from $21.2 billion the prior year. Cash flow remains negative despite rising revenue, and that gap is now driving CDS spreads higher. Mizuho recently reiterated its buy recommendation, pointing to an expected free cash flow inflection point in fiscal 2029, but the average analyst price target of €220.62 — implying 97.8 percent upside — sits in stark tension with the credit market’s deepening alarm.
Technical Damage and a Fragile Recovery
The chart tells a story of severe pressure. The 14-day relative strength index sits at 33.3, approaching oversold territory and explaining why a bounce from the recent low was possible. But the stock remains 27.65 percent below its 50-day moving average of €151.57 and 32.09 percent below the 200-day average of €161.48. Tuesday’s gain leaves the shares just 4.34 percent above the 52-week trough of €105.10.
One analyst at Sevens Report Research reached for a stark comparison, calling Oracle the “canary in the coal mine” and warning it could be the first major cloud provider to crack — potentially the opening act of a long cyclical bear market for equities. Whether that prediction proves accurate depends on how credit markets assess Oracle’s financing plans in the weeks ahead. For now, the gap between analyst optimism and credit market dread has rarely been wider.
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