Oracle's credit default swaps surge as Barclays downgrades its debt rating (www.moomoo.com)

Barclays’ Fixed Income Research team has downgraded Oracle to “Underweight,” warning that massive AI-related capital expenditures have far outstripped the company’s free cash flow and forced heavy reliance on external financing. The bank forecasts Oracle could slide to a BBB- rating (just above junk), with cash potentially exhausted by November 2026 and a pronounced funding gap beginning fiscal 2027 (June 2026). Barclays highlights Oracle’s extreme leverage—debt-to-equity near 500% versus ~50% at Amazon and ~30% at Microsoft—negative free cash flow, over $100B in off‑balance-sheet lease commitments, and heavy vendor‑financing exposure via its $300B partnership with OpenAI. This matters for the AI/ML ecosystem because hyperscale AI buildouts are being funded by unprecedented bond issuance ($140B recently, $160B expected annually), higher risk premia even for AA names, and rising CDS demand as counterparties hedge platform- and partner-related risks. Barclays cites staggering unit costs—$50–60 billion per gigawatt for AI data centers (three times traditional builds), >45 GW of announced U.S. projects and >$2 trillion in related investment—driving doubled capex forecasts since early 2025. The result: tighter credit markets, wider spreads, and a new norm of longer-duration, higher leverage financing that could constrain who can scale AI infrastructure and at what cost, making Oracle a bellwether for industry credit risk and OpenAI counterparty exposure.