After the New York Times reported Nvidia CEO Jensen Huang’s second affair yesterday and the Wall Street Journal reported his board of directors’ preparations to fire him, concerns about tech company Oracle and its reliance on the US processor titan have gone parabolic.

Oracle shed $10 billion in market capitalization during after-hours trading yesterday alone, worsening declines for common shareholders that now exceed 10% over the past month and 35% year-to-date.

On October 28, Oracle pledged that new stock and bond sales through fiscal 2030, excluding refinancing, would be capped at $20 billion. On November 2, it agreed to sell 86 million new shares for $10 billion and priced $10 billion of bonds. 

Unfortunately, as anyone begins to max out their credit like Oracle is doing with its massive bond offerings, it typically becomes more expensive to borrow.

A higher US Federal Reserve benchmark interest rate certainly hasn’t helped, either.

Oracle has had to incentivize bond traders with far more generous coupons to sell its corporate bonds this month versus its offerings just nine months ago.

In February, Oracle sold 2029 notes with a yield (technically, yield-to-maturity) of 4.6%. The company had to sell bonds with the same maturity year in November offering a 7% yield. 

Yield on a corporate bond is definitely not a good figure to have to increase.

40 percentage points — a decisive move in the wrong direction.

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