"Burning money" frenzy comes with a cost: Oracle Corporation (ORCL.US) CDS surges to historic highs, bonds are just one step away from junk status!

On Friday, the credit risk indicator of Oracle Corporation (ORCL.US) hit a historic high, as concerns grew in the market over the company's aggressive cash consumption and the future profit potential of its artificial intelligence investments - particularly after the emergence of a new Chinese model that could rival products like OpenAI. According to data from ICE Data Services, the cost of default protection through credit derivatives for Oracle Corporation increased by about 10 basis points to reach 198.23, setting a new record high close. Investors are seeking more funds to protect Oracle Corporation's debt from default impacts. The previous record was set on March 27 at 198.18. Oracle Corporation is currently in a phase of making huge investments in data centers, resulting in negative free cash flow from its operations. Last week, S&P Global, Inc. downgraded the company's rating to BBB-, just one step away from junk status. The rating agency cited its underestimation of the level of funds needed for Oracle Corporation's investments in artificial intelligence. Meanwhile, tech company stocks were generally hit on Friday, as concerns arose over other models possibly falling behind after the introduction of the artificial intelligence model Kimi K3 by the Chinese AI startup Month. In the Bloomberg U.S. High Grade Corporate Bond Index, Oracle Corporation holds around $117 billion in bonds, making it the largest non-financial company in the index in terms of scale.