Optimism grows: Oracle’s logo on a screen on the floor of the New York Stock Exchange. The tech firm’s fundraising blitz reassures investors on AI spending plans, driving a rally and lifting broader investment grade sentiment. — Bloomberg
NEW YORK: For weeks, Oracle Corp’s debt has been trading like junk amid concerns that its artificial intelligence (AI) investments won’t pay off for years, if at all.
On Monday, those fears appeared to dim after the software giant garnered record demand for a US$25bil bond sale.
The shift was triggered by Oracle’s announcement on Sunday that it was raising about US$25bil of equity in addition to debt this year, reassuring investors that it wouldn’t strain its balance sheet too much as it funds big investments in data centres.
The tech firm’s bonds and stock both gained for most of the session. Some investors said that optimism following the company’s fundraising could spread to the broader credit market.
“The Oracle deal could be the all‑clear for taking risk in investment-grade corporate bonds,” said Mark Clegg, a senior fixed-income trader at Allspring Global Investments, which advised on about US$628bil of assets as of the end of December.
“The large AI financings had been the market’s bogeyman, expected to bring heavy supply for the next few quarters. Instead, the lights came on – and he was gone.”
US high grade corporate bond sales could reach record levels this year, with Morgan Stanley strategists last year forecasting about US$2.25 trillion of issuance.
But investor demand for securities is still high, in part because corporate profits remain strong. Risk premiums on the bonds are hovering close to multi-decade lows.
Investors placed orders for as many as US$126bil of Oracle bonds on Monday, edging out the prior record of US$125bil of orders when Meta Platforms Inc sold US$30bil bonds in October.
The company doesn’t expect to sell more debt in 2026, according to its statement. Some bond investors had estimated that Oracle would sell between US$40bil and US$60bil in debt this year.
The amount of AI-related debt that tech companies will sell in the coming years is a key variable for market performance.
Alphabet Inc, Amazon.com Inc, Meta and Oracle borrowed about US$93bil in the US investment grade corporate bond market in 2025, or about 6% of all debt issued last year.
While the roughly US$8 trillion market comfortably absorbed this first round of AI-related issuance, JPMorgan Chase & Co projected about US$300bil of AI and data centre-related deals every year for the next five years.
Those sales have already emerged this year. International Business Machines Corp sold nearly US$7.5bil in dollar and euro bonds last week and more firms could follow in the coming weeks after they report earnings.
February and March are typically some of the busiest months for the sector but the next two months will be even more active than usual, according to JPMorgan credit strategist Nathaniel Rosenbaum.
In addition to corporate bond sales, banks have put together 10s of billions of dollars worth of deals for data centres where Oracle is the intended tenant.
That includes US$38bil in loans for new facilities in Wisconsin and Texas to be developed by Vantage Data Centres, part of the company’s massive Stargate AI infrastructure contract with OpenAI.
But tech companies generally have strong balance sheets and solid earnings. And in the case of Oracle, it’s raising equity too, including US$5bil of mandatory convertible preferred securities.
The preferreds are being marketed with a dividend of 6.25% to 7.25%, according to people familiar with the matter. The company is also selling as much as US$20bil of shares over time through an at-the-market offering.
Amid those sales, Oracle’s shares closed 2.7% lower on Monday. A representative for the company referred Bloomberg to the company’s press statement.
Oracle’s long-dated bonds rallied in the secondary market and a measure of the company’s credit risk eased the most since April 2021 following the announcement of the bond offering.
Bloomberg Intelligence’s Robert Schiffman and Alex Reid said: “Oracle’s eight-tranche bond deal, which can reach as much as US$25bil, could spark a bond and credit-default swap rally after meaningful underperformance since the third quarter of 2025 as funding certainty arrives, along with a like amount of equity financing to support its AI capital-spending plans.
“After rater affirmations of Oracle’s mid BBB ratings, we see strong value across the curve, especially for longer-duration investors that may see 50 basis points of compression over time from 40-year notes with initial price talk of treasuries plus 225 basis points.”
Oracle last tapped the US corporate bond market in September, raising US$18bil in one of the biggest offerings of 2025.
That deal weakened in secondary trading amid concerns about its rising debt load, which has driven up the cost of insuring Oracle’s debt against default.
The company’s extensive borrowing reflects the scale of financing needed to feed AI growth.
Oracle is building additional capacity to meet demand from its largest cloud customers, including Advanced Micro Devices Inc, Meta Platforms Inc, Nvidia Corp, OpenAI, TikTok Inc and xAI Corp.
Oracle sold debt in eight parts, with maturities ranging from three to 40 years. The longest portion of the deal yields 1.95 percentage points more than treasuries, compared with earlier talk of about 2.25 percentage points.
Bank of America Corp, Citigroup Inc, Deutsche Bank AG, Goldman Sachs Group Inc, HSBC Holdings Plc and JPMorgan are managing the offering, the people said.
Bank of America, Citigroup, Deutsche Bank and JPMorgan declined to comment about the size of the order book for the offering. The other firms weren’t immediately able to comment.
Before Monday, Oracle had about US$95bil of debt in the Bloomberg US high-grade corporate bond index, making it the biggest issuer outside the financial sector. — Bloomberg
