As tech giants ramp up spending on artificial intelligence infrastructure, Oracle is sending a different signal to the market due to the financial pressure from its massive investments. Investor concerns over its credit risk have recently reached historic highs.

Credit market data clearly shows this divergence. The credit default swap (CDS) spread, which reflects Oracle's default risk, hit a record closing high in July. In comparison, while CDS spreads for other tech giants like Google, Amazon, and Meta have also risen, Oracle's situation is the most severe.

The direct cause of this risk is its aggressive capital expenditure. To expand AI data centers, Oracle has taken on nearly $130 billion in debt, resulting in negative free cash flow. S&P Global Ratings has downgraded Oracle's credit rating to the lowest tier of investment grade, just one step away from "junk" status, and noted that its capital spending has far exceeded expectations. The company's stock price has fallen more than 60% from its peak last September.

Another key risk is its business reliance on OpenAI. Of Oracle's $638 billion in contractual obligations (i.e., future performance obligations), about half comes from the single customer OpenAI. OpenAI, which is still in a deep loss-making state and has delayed its IPO plans, adds significant uncertainty to the realization of Oracle's future revenue.

Analysts point out that Oracle's predicament may serve as a warning sign, indicating that debt investors are increasingly worried about whether the massive investments in AI can generate corresponding returns, and this doubt is beginning to show in the broader market.