OpenAI orders are the future, and debt is massive! Oracle Corporation (ORCL.US) has reached a historic high in default risk, with CDS surpassing the peak of 2008.

According to the latest statistical data, the default risk of database software and cloud computing giant Oracle Corporation (ORCL.US) has soared to historically high levels, surpassing the peak observed during the 2008 global financial crisis. The companys five-year credit default swap (CDS) spreada key indicator measuring the cost of insuring against its debt default riskhas reached an all-time high, indicating increasing investor concerns about the true risk of credit default by Oracle Corporation. A credit default swap (CDS) is a financial contract that provides protection against the risk of a borrower defaulting on debt. Higher CDS spread data means that investors are demanding a greater risk premium before they are willing to provide default insurance for the related debt, reflecting a rising perception of credit risk in the market. Oracle Corporation's CDS has surpassed the peak set during 2008. In less than a year, Oracle Corporation has transformed from a global leader in AI cloud computing into a company with historically high default risk, exceeding the "junk-grade cliff" level set during the 2008 financial crisis. One of the world's three major credit rating agencies, Standard & Poor's, previously downgraded Oracle Corporation to BBB- on July 9, 2026, just one step away from the "junk" rating, the most pessimistic assessment. As Oracle Corporation's CDS has surged, the company is increasing its spending on AI infrastructure while also counting OpenAIa company that has yet to turn a profitas one of its largest cloud computing order customers. This includes Oracle Corporation's investment of billions of dollars in cloud computing capacity and AI data centers to meet the continuously soaring demand for AI computing power from clients like OpenAI. Oracle Corporation is increasingly relying on debt financing and a single AI application customer to support the expansion of its AI cloud computing infrastructure business. As capital expenditures for artificial intelligence continue to rise, investor concerns about its balance sheet have intensified. Contracts related to OpenAI promise Oracle Corporation significant future computing power demands, but Oracle Corporation must bear costs such as data center land contracts, chips, electricity, and financing upfront. Oracle Corporation is converting the long-term AI computing power demands of major customers like OpenAI into data center construction, capital expenditures, and AI financing burdens in advance, while the fulfillment of these orders still depends on clients' financing capabilities and AI revenue generation. Oracle Corporation's Remaining Performance Obligations (RPO) for the 2026 fiscal year have reached $638 billion, but high capital expenditures, approximately $129.5 billion in debts, and long-term lease commitments have led to a repricing of its credit risk. These concerns have consistently exerted selling pressure on its stock price. Oracle Corporation's stock has declined by a cumulative 27% this year and nearly 44% over the past year, primarily due to investors reassessing the company's aggressive AI investment strategy and its rising level of credit leverage. From a leader in AI cloud computing to the eye of a credit default storm. Oracle Corporation has not entered a credit crisis due to a complete failure in its AI computing-related cloud business; rather, it is precisely because the growth in AI orders has outpaced its own capital capacity. In the fiscal year 2026, Oracle Corporation's cloud computing infrastructure business, Oracle Cloud Infrastructure (OCI), saw revenues grow by 77%, while overall cloud business revenue increased by 39%, and the RPO surged by 363% to $638 billion, indicating its significance as a key player in global AI training and inference infrastructure. However, to fulfill these future revenues, the companys annual capital expenditures skyrocketed from $21.2 billion to $55.7 billion. Even though operating cash flow reached a record $32 billion, free cash flow turned negative at -$23.7 billion. In other words, Oracle Corporation has experienced an "explosive demand for AI cloud computing infrastructure orders, but has yet to transition from large contracts to sustainable cash returns, thus transforming its commercial success in AI cloud computing into a pressure test for its balance sheet. What truly alarmed the credit market was the simultaneous layering of leverage, term, and counterparty risks: as of the end of the fiscal year 2026, Oracle Corporation's debt stood at approximately $129.5 billion, about 4.3 times its EBITDA, while it had also signed approximately $260 billion in long-term data center lease commitments; these leases typically last for 15 to 19 years, while some client computing power contracts extend for only about five years, creating a classic mismatch in asset-liability terms. More critically, OpenAI accounts for approximately half of its $638 billion RPO, effectively causing Oracle Corporation to use its investment-grade credit to finance the construction of long-term fixed assets for an AI lab that is still consuming cash. As a result, S&P downgraded Oracle Corporation to BBB-, just one step away from junk status, on July 9, 2026; by early August, its five-year CDS had risen to approximately 215 basis points, with bond yields reaching levels typically associated with high-yield bonds of 7%-8%. This does not indicate that Oracle Corporation is on the verge of default, but rather that the credit market is pricing unprecedented risks related to delays in data center projects, insufficient fulfillment by OpenAI, rapid depreciation of chips, or rising refinancing costs. The largest difference between Oracle Corporation and competitors like Microsoft Corporation, Alphabet, and Amazon.com, Inc. is not weaker AI demand, but rather that its leverage is significantly higher, free cash flow is weaker, and customer concentration is greater as it enters the construction cycle. Free cash flow conversion rate, customer prepayment ratio, lease versus customer contract term discrepancies, adjusted debt/EBITDA, CDS, and credit ratings are becoming core indicators for investors assessing the true winners of the "AI super bull market." Thus, Oracle Corporation has become the first credit litmus test in the entire AI debt cycle. According to Castle Securities, by 2028, AI chip procurement alone could generate more than $500 billion in new debt; this "computing power securitization" can lock in the procurement of AI computing power clusters, optical communication/interconnects, data center CPUs, high-performance Ethernet switching infrastructure, data center HBM/DRAM/NAND storage components, and the entire power supply chain of data centers, but it also transforms the business risks that originally depended on end-user AI revenue into inter-nested credit risks between bonds, special purpose vehicles (SPVs), long-term leases, and supplier guarantees.