The cost of "burning cash" becomes apparent: Oracle (ORCL.US) CDS soars to a historic high, bonds just one step away from junk status!

According to Zhitong Finance APP, on Friday, Oracle's (ORCL.US) credit risk indicators reached a record high as market concerns intensified over the company’s aggressive cash spending and the future profitability of its AI investments—especially after the emergence of a new Chinese model that could rival products such as OpenAI.

According to ICE Data Services, the cost of using credit derivatives to protect Oracle against default rose by about 10 basis points to 198.23, setting a historic record closing, as investors demanded more compensation to safeguard Oracle’s debt from potential defaults. The previous record was 198.18 set on March 27.

Oracle is currently in a phase of massive investment in data centers, and its operations have resulted in negative free cash flow. Last week, S&P Global Ratings downgraded the company's rating to BBB-, just one step above junk status. The rating agency stated it had consistently underestimated the amount of upfront capital Oracle would require for its AI investments.

Meanwhile, technology stocks broadly came under pressure on Friday after Chinese AI startup Moonshot AI launched its artificial intelligence model Kimi K3, sparking concerns that other models might be left behind.

Within the Bloomberg US High Grade Corporate Bond Index, Oracle has about $117 billion in bonds outstanding, making it the largest non-financial company in the index.