Oracle’s rising debt costs and increased credit default swap (CDS) spreads reflect growing investor concern about the company’s financial stability. As of the latest data, Oracle’s yield to maturity stands at 5.10%, compared to 4.10% for Alphabet and 3.75% for Microsoft. Additionally, Oracle’s CDS spread has surged to 139 basis points, indicating an elevated risk of default.
Oracle’s $300 billion deal with OpenAI has raised questions about its future profitability amidst concerns of substantial cash burn, expected to reach $143 billion between 2024 and 2029. In contrast, Microsoft and Alphabet maintain stronger financial positions and have successfully built profitable cloud computing businesses, making them more favorable investments in the AI sector.
Given these dynamics, analysts caution investors against Oracle while highlighting Microsoft and Alphabet as better alternatives for those looking to capitalize on AI advancements.
