Despite concerns that China’s DeepSeek platform would provide less expensive ways to use artificial intelligence, bond investors gave Oracle Corp. a $7.75 billion boost of confidence on Thursday to help refinance a massive mountain of old debt.
The funding was announced approximately a week after Larry Ellison, the executive chair of Oracle (ORCL), Masayoshi Son, the chief executive of SoftBank Group Corp. (JP:9984) (SFTBY), and Sam Altman, the CEO of OpenAI, met at the White House to announce their new Stargate partnership. The partnership calls for an initial investment of $100 billion to develop data centers and energy infrastructure in the United States.
China’s buzzy chatbot, which looks like its American competitors but reportedly costs a fraction of that, swiftly overtook the major AI push.
Investor interest for the refinance was high for Oracle, which has $7 billion in corporate bonds maturing this year; at one time, order books for its six-part bond offer exceeded $24 billion, according to Informa Global Markets.
With some callable features, the new set of bonds that were sold on Thursday had maturities ranging from three to forty years. However, longer-term financings may expose bond investors to fluctuations in interest rates and the possibility of once-dominant business models becoming obsolete.
“I’m always looking for the downside,” Bryce Doty, a senior portfolio manager at Sit Fixed Income, stated during a MarketWatch interview. Oracle is a fine firm, he added, but he doesn’t think American IT companies will be able to make money off of their AI efforts. “There are other roller coasters to choose from,” Doty stated.
In a client note released Thursday, Jordan Chalfin, head of technology at CreditSights, and Michael Puch, associate analyst, stated that “Oracle is set to be the primary beneficiary from the Stargate project since it will build and run cloud infrastructure, although its upside could be limited if efficiency breakthroughs from DeepSeek translate into drastically lower training and interference costs across the industry.”
This week, major tech stocks experienced a steep decline because to concerns over possible DeepSeek repercussions. According to FactSet, the shares of Microsoft Corp. (MSFT) were down 6.5% and Oracle’s were down almost 7% during the week ending Thursday, while the shares of the AI chip giant Nvidia Corp. (NVDA) were down roughly 16%.
But this week, investment-grade corporate bonds have been less erratic than equities, possibly due to a more stable benchmark 10-year Treasury yield BX:TMUBMUSD10Y, which has been hovering around 4.5% lately.
According to the ICE BofA U.S. Corporate bond index, spreads, or the additional compensation investors can receive on corporate bonds over a risk-free benchmark rate, displayed very stable levels at roughly 80 basis points.
According to Collin Martin, a fixed-income analyst at Charles Schwab, “corporate bonds are basically priced to perfection,” as explained by MarketWatch. However, he added that there has been a strong demand for corporate debt from institutions, pension funds, and other investors, which has controlled the cost of financing large firms.
According to President Trump, the Stargate group of tech CEOs may eventually contribute up to $500 billion to the project. A request for comment from Oracle was not immediately answered.
