A few months back, shares of Oracle popped nearly 40% on news of a deal to expand its AI operations.
Shares have now round-tripped back down to that level, as many – including us – have looked at the rising level of circular financing deals in the AI space.
We’re not alone. The credit market is balking at some of the AI spend going on today:
Credit default swaps on Oracle debt have more than doubled in the past month, and are higher than during the end of the 2022 bear market. (Source: Zerohedge via X)
Credit default swaps (CDS) are a tool that measures the cost to insure against a company’s debt.
A soaring CDS suggests that investors are demanding a higher return. The implication? That debt isn’t as safe as it may appear.
It’s also a sign that the liquidity crisis and dangers in the private credit market are starting to show up in the mega-cap companies that are raising debt to invest in AI and data centers. And if that starts a slowdown, it could mean that the stock market hits the brakes.
~ Addison
P.S. This echoes sentiment from last week’s call on Grey Swan Live! with Andrew Zatlin — the #1-ranked economic forecaster on Bloomberg.
Zatlin sees a pullback in stocks now, with a rip in 2026 ahead of the midterms. While the government closure is over, the real challenge now is in economic data – or the lack thereof. That’s increasing the chances of a Fed pause in lowering interest rates in December, which in turn is sending asset prices lower.
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