A prominent Wall Street voice says Oracle (ORCL) has become the biggest loser of the current AI correction as investors react to its rising leverage.
On Friday, ORCL dropped to as low as $193.55, recording a nearly 45% nosedive from its all-time high of $345.72, which it hit in September.
In a new video update, “Big Short” investor Steve Eisman says ORCL’s sell-off is tied directly to the way Oracle is funding its rapid AI expansion compared with other hyperscalers.
“Oracle cannot fund its huge AI expenditures from cash flow like Microsoft and Google can so easily do.”
He points to a sharply different financing strategy as the reason for growing market anxiety.
“Oracle needs debt to fund at least some of its CapEx (capital expenditure), and it recently raised $18 billion, thereby increasing its overall debt load to $100 billion.”
Eisman says that contrast has become a key financial stress marker during the AI buildout. Microsoft and Google are spending billions from internal profits, while Oracle is borrowing heavily to stay competitive.
“And that has made the market nervous.”
Oracle has been grabbing headlines as of late due to the price explosion of its credit default swaps (CDS). Data shows that the value of five-year credit default swaps (CDS) tied to Oracle has skyrocketed in the last few months to about 1.11 percentage points per year, or about $111,000 to insure $10 million of debt.
The surge in demand for Oracle’s CDS indicates that investors are rushing in to buy insurance against the risk that the cloud computing firm will default on its massive debt obligations.
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