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Oracle hit hard in Wall Street's tech sell-off over its AI bet

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Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#171

Post by JCM9 »

BiraIgnacio wrote: post #141
chollida1 wrote: post #17

Its worse for some other "ai" related companies. Coreweave for instance, now has its CDS trade around 600bp, which is a 1/3 rise in 2 months, which implies that the probability of a default in 5 years is 40% at a 40 cent recovery rate. That makes Coreweave's credit rating the equivalent of CCC-, which aint good.

Fascinating. I don't follow nor really understand this space. Is this type of fluctuation unusual?

It’s not good, and is a sign the market is getting increasingly bearish on the future of AI from a business standpoint. That doesn’t mean the tech is bad, but these are signs Wall Street is saying the math doesn’t add up here and thus there’s storms building on the horizon.

Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#172

Post by quickthrowman »

SilverElfin wrote: post #137
chollida1 wrote: post #17

Its worse for some other "ai" related companies. Coreweave for instance, now has its CDS trade around 600bp, which is a 1/3 rise in 2 months, which implies that the probability of a default in 5 years is 40% at a 40 cent recovery rate. That makes Coreweave's credit rating the equivalent of CCC-, which aint good.

Sorry if this is basic, but do you mind explaining the logic here for those who aren’t familiar? Also where are you getting this data? Thanks in advance.

You can buy insurance on a bond defaulting, it’s called a credit default swap. One party sells a credit default swap and another party buys the credit default swap.

The price of a credit default swap is essentially the probability that the borrower defaults on its bonds (misses an interest payment) which would mean the person who sold the credit default swap would owe money to the holder of the credit default swap.

The price of a credit default swap increasing means the market is pricing in a higher probability of Coreweave defaulting on a bond. Oracle credit default swaps have also increased in price lately.

Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#173

Post by [deleted] »

kjreact wrote: post #148
Elizer0x0309 wrote: post #139

I still believe in AI and I believe many of these companies are going to be staples of this new era. That said, I hope Oracle doesn't survive this transition. We need higher moral companies to usher in the AI era.

Companies with high morality, do those even exist? Which one of the big tech companies do you expect to work towards benefiting humanity instead of focusing on turning a profit by any means?

[deleted]

Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#174

Post by reactordev »

fakedang wrote: post #168
unyttigfjelltol wrote: post #157

Earlier quoted context omitted.

But imagine all the data, tech and data center companies simultaneously go into receivership. Farfetched, but indulge the fantasy. At that moment what choice would the government have but to conduct a rescue that at least keeps the lights on, and probably more? What’s the alternative? Extensive data losses, business interruptions— if just a couple of those key companies spontaneously stopped operating, chaos.

Private equity: Y'all got some of that excess data center capacity for cheap? Source, we basically explored this at my previous job, and that was 7 years back.

Curious what your 10 year projection is…

Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#175

Post by chollida1 »

SilverElfin wrote: post #137
chollida1 wrote: post #17

Its worse for some other "ai" related companies. Coreweave for instance, now has its CDS trade around 600bp, which is a 1/3 rise in 2 months, which implies that the probability of a default in 5 years is 40% at a 40 cent recovery rate. That makes Coreweave's credit rating the equivalent of CCC-, which aint good.

Sorry if this is basic, but do you mind explaining the logic here for those who aren’t familiar? Also where are you getting this data? Thanks in advance.

Sure, the math isn't that complicated but i'll give the caveat that I don't manage money in this space so its a bit outside my area of expertise.

THe annual premium is approx the premium paid to cover the expected loss, so:

spread = (prob_of_default_annual * (1-recovery_rate)

We have a spread of 0.06 and a recovery_rate of 0.4

so the annual probability of default is about 0.10

Now converting that to 5 year we have

prob_of_default5y = 1 - (1-pd_annual)^5

Which gives about 40%.

And if you look at the cds spreads across various bond ratings you'll see they look like

Rating || 5y CDS Spread || 5 yr default prob

BBB 60-120bps 1-3%

BB 150-250bps 5-15%

B 400-700bps 25-34%

CCC 700-1200bps 35-60%

Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#176

Post by insane_dreamer »

Elizer0x0309 wrote: post #139

I still believe in AI and I believe many of these companies are going to be staples of this new era. That said, I hope Oracle doesn't survive this transition. We need higher moral companies to usher in the AI era.

> We need higher moral companies to usher in the AI era

I agree that Oracle scrapes the bottom of the moral barrel.

But OpenAI, post-Altman-coup, is right there at the bottom with them.

Not sure that Google, Amazon and Microsoft are that much higher.

Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#177

Post by cjbgkagh »

robocat wrote: post #169
cjbgkagh wrote: post #110

Earlier quoted context omitted.

There is no natural limit to insanity

The natural limit to insanity is death. (Unless your definitions of words are very different from mine).

I would consider death the asymptote, the divide by zero, dead things have no sanity.

I think there is a reversion to the mean bias, or this idea that we’re in post history era, or some other governing factors will kick in. Once out of a local minima things can become quite unmoored quite quickly.

"Hey Friend Listen, I know things in the world are scary right now... But It's gonna get way worse"

Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#178

Post by p4ul »

jlarocco wrote: post #70
pm90 wrote: post #55

Earlier quoted context omitted.

How do you mean? Have they succeeded at squeezing any profit out of anything thats not Oracle DB?

I meant they've always had a reputation for being ruthless business people. Charging license fees based on the amount of memory in the host machine instead of the VM running Oracle, and things like that. They nickle and dime everything. https://investor.oracle.com/investor-news/news-details/2025/... They don't break it out into products in the results, but it looks like hardware, software, cloud, and support were all…

I agree with this, and I'd go even a bit further and describe them as predatory. They seem to have absolute contempt for their customers, and look for every possible opportunity to bleed them dry.

But then again, I'm probably guilty of anthropomorphizing the lawnmower. [1]

[1] https://www.youtube.com/watch?v=-zRN7XLCRhc&t=2308s

Re: Oracle hit hard in Wall Street's tech sell-off over its AI bet

#180

Post by MangoToupe »

lokar wrote: post #80
hackernewds wrote: post #61

Earlier quoted context omitted.

are you suggesting bailouts for the AI data centers are the new too big to fail

Coreweave can default and be liquidated and the data centers will keep running just fine.

I don't think anyone is worried about the data centers but rather that the pretense of demand for them was fabricated to begin with.

Of course, we can always find ways to use compute in non-productive ways—mining crypto, for instance.

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