How Oracle became a ‘poster child’ for AI bubble fears

Oracle (ORCL) stock’s roar and bust successful 2025 has go emblematic of the tech trade’s cardinal conflict: Investors can’t determine whether AI is simply a generational accidental oregon a looming risk.

Oracle started the twelvemonth connected a precocious enactment by announcing a associated task with ChatGPT developer OpenAI (OPAI.PVT) and SoftBank called Stargate, successful which the companies committed to investing $500 cardinal successful US AI infrastructure. President Trump announced the quality successful the Oval Office successful January, flanked by the respective companies’ leaders, including Oracle seat Larry Ellison — a determination that sent the banal soaring.

AI optimism continued to propulsion Oracle shares higher pursuing its quarterly net reports successful June and September, with AI-driven deals acceptable to propulsion unreality conception gross to $166 cardinal successful 2030. The stock’s surge successful September concisely made Ellison the world’s wealthiest person.

But AI euphoria rapidly gave mode to doubt. Investors became progressively acrophobic implicit the rising usage of indebtedness to money tech firms’ AI spending, conscionable arsenic the payoff of that spending remains hotly debated. Those concerns are evidenced successful the budding request for Big Tech recognition default swaps (CDS) — fiscal contracts that enactment arsenic security by letting investors stake connected the likelihood that a institution volition default connected its debt.

Read more: How to support your portfolio from an AI bubble

Shares successful Oracle person dropped much than 40% from their September highest but are up 16% for the year.

“As these firms specified arsenic Oracle person issued much debt, they've go much leveraged, which from a recognition position means they're riskier,” S&P Global Market Intelligence expert Gavan Nolan said, noting that CDSs person begun trading for the archetypal clip for adjacent the "Magnificent Seven" tech firms with the highest recognition ratings, similar Microsoft (MSFT) and Alphabet (GOOG, GOOGL), successful caller weeks.

Oracle has been astatine the halfway of the indebtedness fears. The institution issued astir $26 cardinal successful bonds this year, per Bloomberg data. Its CDS spreads person widened significantly, with the outgo of insuring the company’s indebtedness against default for 5 years hitting its highest since 2009 this month.

“ Oracle has go the poster kid for fears of an AI bubble,” Oracle capitalist and tech expert Cory Johnson told Yahoo Finance.

Oracle declined to remark for this story.

In its latest net results, the tech firm’s full indebtedness roseate 40% from the erstwhile twelvemonth to $124 billion, conscionable arsenic its currency outflow climbed from $2.7 cardinal to $10 billion. Analysts noted that aft Oracle’s results, the institution softly disclosed successful an SEC filing that it has $248 cardinal successful further lease commitments acceptable to statesman betwixt the 3rd 4th of its 2026 fiscal twelvemonth and 2028 — mostly for information centers — not reflected successful its equilibrium sheet.