Skip to content
Welcome, thoughtbot's Giant Robots listeners!Start here
Data Centres: Boom and Backlash
22OCT

Oracle's credit spread hits 2008 level

2 min read
16:40UTC

Torsten Slok said on 26 July that Oracle's credit default swap spread has reached its 2008 level, with debt-to-equity near 739 times at the smaller AI lenders.

IndustryAssessed
Key takeaway

Credit markets could slow AI spending well before Congress or the labour market does.

Oracle's credit default swap spread now sits where it sat in 2008, according to Torsten Slok, chief economist at Apollo Global Management, who told CNBC on 26 July that hyperscaler spreads are rising off the bottom and that "the trend is certainly not your friend"⁠1. A credit default swap prices insurance against a borrower failing to pay, which makes it the market's live estimate of default risk. Those spreads move faster than any rating agency does.

The leverage sits further down the chain. Mizuho analyst Vijay Rakesh flagged negative free cash flow, widening spreads and capital-raise risk at the smaller AI infrastructure lenders. Debt-to-equity runs near 739 times at CoreWeave, 172 at Applied Digital and 131 at Nebius, against roughly 18 at Alphabet⁠2. Analysts quoted by CNBC expect US credit spreads to hold their range through the third quarter, then widen in the fourth and into 2027.

Oracle told the Securities and Exchange Commission in June that AI adoption had driven its workforce reductions, the clearest corporate admission this beat has recorded. The same company now prices as a default risk. Lenders could impose a capital-spending slowdown on their own, and that route reverses the AI-jobs story without a vote in Congress or a turn in the labour market. Lisa Cook raised widening software bond spreads as a stability concern in May, then left the point out of her July remarks.

Deep Analysis

In plain English

A credit default swap is essentially insurance against a company failing to repay its debt. Oracle's cost for that insurance just reached the same level it was at during the 2008 financial crisis, according to Apollo Global Management's chief economist Torsten Slok. Meanwhile, some smaller companies that lend money to build AI data centres have borrowed far more than they are actually worth, in one case 739 times their equity. If AI spending slows down, these companies could struggle to repay what they owe.

Deep Analysis
Root Causes

Smaller AI infrastructure lenders like CoreWeave have financed GPU purchases through debt secured against the hardware itself and long-term compute contracts, rather than equity, producing debt-to-equity ratios as high as 739 times.

That structure works only as long as compute demand and contract renewal rates hold; any slowdown in AI spending directly threatens debt service on assets (GPUs) that depreciate faster than the loan terms assume.

What could happen next?
  • Risk

    Debt-to-equity ratios as high as 739 times at smaller AI infrastructure lenders create default risk concentrated in that segment if AI compute demand growth slows.

  • Meaning

    Market concern has moved beyond the most leveraged smaller lenders and now reaches investment-grade names, the shift Oracle's credit default swap spread reaching its 2008 level signals.

First Reported In

Update #18 · SAP freezes R&D headcount as others deny AI

CNBC· 27 Jul 2026
Read original →
Different Perspectives
Mohsen Rezaei
Mohsen Rezaei
The senior Iranian security official and former IRGC commander told Press TV that US-linked technology infrastructure in the region could become a target if war resumes. He named the UAE and valued the assets at more than US$2 trillion, without a breakdown.
Mykhailo Shelemba
Mykhailo Shelemba
Datagroup's chief executive says the Kyiv data centre hit on the night of 18 to 19 October is beyond repair. Services continue from backup sites, and no staff were hurt.
Kristen Umstattd
Kristen Umstattd
The Loudoun supervisor voted against fast-tracking Amazon's rezoning of the Ashburn campus. She said there were no figures yet on homes, school or road costs.
Akishima residents' litigation group
Akishima residents' litigation group
The group formed on 18 October and plans to sue Nihon GLP by year-end to stop eight data-centre buildings. Its lawyers will argue rights to life, health, clean water and a natural environment after mediation failed in August.
Óscar López
Óscar López
Spain's Digital Transformation minister said on 22 October he could not confirm when the data-centre decree will be approved. He added that Google has always committed to investing in Spain.
Google
Google
Google said it would comply with LVV's order to stop preparatory works at Muhos and Kajaani until environmental assessments finish. A spokesperson conceded the company had fallen short.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.