The bank reversed its bearish call on Oracle debt as AI spending reshapes the credit market, though default insurance costs are still climbing
Barclays has changed its mind about Oracle ’s bonds. The bank, which told clients to steer clear of the software giant’s debt in November 2025, had moved to a more favorable stance by February 2026.
The timing matters. Oracle is heading into an investor day on October 28, 2026, and its credit profile has rarely been under this much scrutiny.
Barclays is also making a bigger argument about where AI financing is going. The bank predicts that the growth of AI-related credit will lead to $1 trillion in chip debt. It is also warning that the volatility is far from over.
Rewind to November 2025. Barclays downgraded Oracle’s debt to Underweight, citing concerns about funding gaps and potential pressure on the company’s credit rating.
That call aged reasonably well on the rating front. In July 2026, S&P cut Oracle to BBB-, the lowest rung that still counts as investment grade.
The research points to Oracle’s heavy investment in AI infrastructure. Barclays sees those bets as supportive of the bonds’ appeal, especially as market appetite for AI-related assets keeps growing.
Oracle’s balance sheet has gotten a lot heavier. Total debt now sits at approximately $169 billion, having doubled in recent years.
The company isn’t done borrowing either. Oracle plans to raise $45-50 billion through a mix of debt and equity in 2026 to fund its AI data-center expansion.
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The credit default swap market is flashing caution. Oracle’s five-year CDS spreads reached roughly 295-300 basis points in October 2026, a level approaching high-yield territory.
A spread near 300 basis points means investors are pricing Oracle more like a junk-rated borrower than its official rating suggests.
The operating business tells a different story. Oracle reported Q1 FY2027 revenue of $19.3 billion, a 30% increase year over year.
Cloud infrastructure sales grew 121% over the same period. Oracle’s backlog stands at $664 billion, which gives the company a long runway of contracted demand.
Oracle is not borrowing in a vacuum. Barclays predicts that hyperscaler capital expenditure could reach or exceed $1 trillion annually in the coming years.
Much of that spending is being financed with borrowed money. That’s where Barclays’ $1 trillion chip debt forecast comes in.
The risk is execution. Oracle has to build data centers, raise $45-50 billion, and convert a $664 billion backlog into cash, all while sitting one notch above high-yield at S&P.
A further downgrade would push Oracle out of investment grade. That matters because many institutional funds can only hold investment-grade debt, so a slip could force selling regardless of the company’s underlying performance.
The October 28 investor day is the next major checkpoint. Bondholders will likely want clarity on two things: Oracle’s long-term growth strategy and its near-term financing needs.
Specifically, the mix of debt versus equity in the planned capital raise could shape sentiment. More equity would ease leverage concerns, while more debt would add to an already heavy load.