Oracle’s quarterly revenue miss has pushed its bond yields to their highest levels of the year — a sign that investors are demanding greater compensation for the growing risks associated with the company’s debt.
The market reaction centers on Oracle, but the shift reflects something larger: Big Tech companies, once viewed as cash-rich fortresses, are increasingly leaning on debt to finance massive AI infrastructure spending. Investors are beginning to scrutinize those balance sheets more closely.
“This is the 1998 moment,” Anuj Kapur, CEO of CloudBees and a longtime tech executive who worked through the dot-com era, told Axios.
The promise of AI, he added, is colliding with “the inconvenient math of debt and capex.”
Tech giants are projected to spend more than $700 billion next year to support their AI buildouts, according to Bloomberg data and company earnings reports. Historically, the sector’s biggest players — Meta, Google, and others — funded these ambitions with their own cash reserves.
That’s changing.
Companies including Meta, Google, Oracle and AI-infrastructure provider CoreWeave have issued $121 billion in investment-grade debt this year, up from just $17 billion last year, Bank of America reports.
The debt market is becoming the key barometer for assessing the long-term viability of AI spending.
“The state of the debt market is so much more important than the equity market,” Kapur said. Debt investors don’t need moonshot returns; they only need to believe they’ll be repaid with interest. If confidence wavers, yields rise — and borrowing becomes more expensive.
That dynamic is increasingly visible any time sentiment shifts around the AI trade.
Warning signs
Credit default swaps — derivatives traders use to bet on the likelihood of a company defaulting — are also flashing caution.
“Oracle’s credit default swaps are priced like the company is jogging barefoot across a field of Legos,” Mark Malek, chief investment officer at Siebert, wrote in a note.
While some CDS activity is speculative, the spike suggests investors are more uneasy about leveraged AI expansion.
Despite the recent debt spree, many data center giants are still primarily funding expansion with cash.
“That could change going forward,” said Joseph Briggs, economist at Goldman Sachs. He noted that the late 1990s saw a similar surge in tech-sector borrowing — a pattern analysts are watching closely — but emphasized, “We’re not in a bubble yet.”
Demand.
If there’s even a hint that enterprises are slowing their AI spending, investors could get nervous, Kapur warned — potentially tightening credit conditions further.
The bottom line
The credit market is starting to sort AI players by more than revenue growth or innovation claims.
Balance sheet strength, borrowing costs, and cash burn are back in focus — reshaping how investors price the future winners and losers of the AI race.
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