Morgan Stanley credit analysts Lindsay Tyler and David Hamburger said the outlook for 2026 is grimmer unless the database giant soothes investors fretting about the cost of its artificial intelligence binge. They pointed out a funding gap, a swelling balance sheet, and plain-old obsolescence risk as hazards piling up around Oracle.
ICE Data Services figures show the cost of insuring the company’s debt over five years rose to 1.25 percentage points. Tyler and Hamburger said the swaps are close to threatening the 2008 record as banks and investors hedge against a borrowing spree that looks more frantic every month.
The pair wrote that credit default swaps could rise by 1.5 percentage points in short order and might creep towards two percentage points if Oracle keeps offering only cryptic hints about how it will finance its sudden urge to build more data centres than sense. ICE Data Services shows that the previous record was 1.98 percentage points during the 2008 meltdown.
Tyler and Hamburger wrote: "Over the past two months, it has become more apparent that reported construction loans in the works, for sites where Oracle is the future tenant, may be an even greater driver of hedging of late and going forward.”
Investors have also started grumbling that Oracle’s spending plans appear to shift every few weeks. The outfit has been talking up enormous cloud and AI capacity. Still, insiders in the debt market say the numbers floating around are so large that traders cannot work out whether they are firm commitments or aspirational waffle. The opacity has only encouraged more hedging activity as lenders brace for bigger facilities to hit the market in 2025 and 2026.
Analysts following the company’s debt said banks have been poring over planning records and construction filings to guess how many fresh facilities Oracle intends to occupy. Several noted that the mix of private lending and construction credit has made the capital structure tricky to model, especially as expectations for interest rate cuts have shifted during the past few months.
People close to the trading desks say sentiment is being nudged along by Oracle’s nagging habit of dropping giant capital expenditure targets with few details about timelines or revenue payback. That sort of behaviour always sets off nervous laughter among the cocaine-nose-jobs of Wall Street, who prefer their spreadsheets predictable and their borrowers slightly less excitable about grand ideas.
The stock has started to feel the strain, too, which Tyler and Hamburger said could force management to outline a serious financing plan during the upcoming earnings call so investors can stop guessing how deep the company intends to dig into the debt markets.
For now, traders are bracing themselves for a messy 2026 as they wait to see whether Oracle’s vast AI dreams will come with an equally vast bill.
