Oracle’s AI land-grab has smashed into a dull but deadly problem as lenders decide they have limits.
The database dinosaur’s $300bn deal with OpenAI is stretching the cocaine nose jobs of Wall Street as banks try to shift mountains of data centre debt.
Banks, including JPMorgan Chase, spent months trying to syndicate billions in loans for data centres in Texas and Wisconsin leased to Oracle. Plenty of usual buyers are capped on how much exposure they can take to one counterparty, so balance sheets filled up and new projects started looking awkward.
Crusoe wanted to expand a data centre complex in Abilene, Texas, but lenders baulked at leasing to Oracle, so it leased the space to Microsoft instead.
The financing snag lands on top of grid strain and a growing public backlash against data centres.
Any slowdown in construction means AI firms get stuck waiting for the compute they have already promised users.
Lenders relaxed a bit after Oracle said it would raise the cash it needs for 2026 by issuing roughly $50bn in stock and bonds. Oracle said in a post on X last week that each data centre it is developing for OpenAI is progressing on schedule.
Morgan Stanley credit analysts wrote in February: “We’ve pondered how Oracle’s considerable funding needs over the next three years may test the depths of different fixed-income markets.”
Even with that $50bn, they peg extra cash needs of $100bn or more for 2027 and the first half of 2028.
“We are proud of the rapid progress that’s been made both in financing and developing our data centres,” an Oracle spokesperson said in an email. “Our partners have diversified their capital sources in ways that enable us to keep construction moving forward on time and as planned.”
OpenAI is counting on Oracle to deliver enough capacity to keep ChatGPT growing ahead of a hoped-for listing. Silicon Valley needs debt to hit its AI spending targets, with big tech expected to self-fund only about half of the $3tn projected through 2028.
So far, the cocaine nose jobs of Wall Street have been happy to hand a blank cheque to the cleanest credits, such as Google, Microsoft and Meta. But Oracle does not sit in that club, with a lower investment-grade rating, more debt and cash burn.
Oracle shares have fallen more than 30 per cent in the past six months. The company’s OpenAI-linked borrowing mainly sits in projects run by data centre developers, not on Oracle’s balance sheet.
