US Stock Market Move | Oracle Corporation (ORCL.US) falls more than 4% - aggressive capex may lead to tight credit conditions.

On Friday, Oracle Corporation (ORCL.US) fell by over 4%, closing at $201.44. It is reported that Oracle Corporation issued $18 billion of investment-grade bonds in September to increase AI spending, and related banks also initiated $38 billion of debt issuance to fund data centers related to Oracle Corporation. Following this, the company's stock price surged in September, but has since plummeted by 33% since hitting a historical high on September 10, as investors reevaluate the impact of the company's aggressive capital expenditures on its balance sheet and how it will finance the massive capital spending. Oracle Corporation forecasts that its current fiscal year capital expenditure will be $35 billion, with most of it going towards its cloud business. Meanwhile, this massive spending is damaging the company's balance sheet, with this year's free cash flow expected to be negative $9.7 billion, marking the first time the company has had negative free cash flow since 1990. More importantly, in the next two fiscal years, Oracle Corporation's free cash flow will further decrease, potentially reaching negative $24.3 billion by the 2028 fiscal year. S&P Global, Inc. recently revised Oracle Corporation's outlook to "negative" due to its expected capital expenditures and debt issuance to fund accelerated growth in AI infrastructure, leading to its credit condition being under pressure. Oracle Corporation's five-year credit default swap (CDS) reflecting leverage risks has soared to its highest level in three years. In response, Easterly EAB Global Macro Strategist Arnim Holzer stated, "It should not be surprising to see Oracle Corporation's CDS rising. These companies are investing significant funds and committing to massive capital expenditures, some of which will be financed through debt. This does not mean that Oracle Corporation's stock is junk, but it is likely to be more volatile."