The cost to insure Oracle’s (ORCL) debt has surged sharply as investors search for protection against a potential reversal in the AI boom.
The price of five-year credit default swaps (CDS) tied to Oracle has tripled in recent months to around 1.11 percentage points per year, or about $111,000 to insure $10 million of debt, reports Bloomberg.
A CDS serves as insurance against a company defaulting on its debt. When CDS prices explode, it shows that traders believe the firm’s credit risk is worsening.
Data shows that trading volume in the swaps has swelled to about $5 billion over seven weeks, up from just over $200 million in the same period last year.
Oracle has been involved in a number of debt deals this year as the company pushes to be a top player in the AI race.
Earlier this month, reports emerged that lenders are lining up an $18 billion loan tied to Oracle and OpenAI’s Stargate initiative. In October, Oracle sought the assistance of JPMorgan Chase and others to spearhead a $38 billion debt sale to fund data center projects in Texas and Wisconsin. And in September, Oracle tapped the bond market to raise $18 billion for a data center venture.
ORCL is trading at $210, down nearly 40% from its all-time high of $354, which it hit in September.
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