Debt-heavy data centre push puts oracle bonds and AI bubble fears under the microscope
Oracle has quietly become the AI trade’s biggest credit‑risk stress test.
Oracle’s share price is down nearly 50 percent from its September 10 peak of US$345.72, including a 5.4 percent drop on Wednesday that dragged major AI names and the S&P 500, Dow and Nasdaq lower, according to CNBC.
For investors, the issue is no longer just earnings momentum – it is how far a legacy tech giant can stretch its balance sheet to fund an AI land grab.
According to Bloomberg, Oracle’s latest results missed analysts’ expectations for cloud revenue, even as the company lifted its annual capital spending target by US$15bn and more than doubled future lease commitments.
The stock then posted its steepest one‑day fall in almost 11 months, while a key measure of its credit risk hit a 16‑year high.
JPMorgan credit analyst Erica Spear called Oracle a “show me story,” saying the combination of a “modest top‑line miss, sharply higher FY26 capex, and still‑evolving AI unit economics” did not ease credit worries.
She expects pressure on Oracle bonds to persist and noted that management continues to frame funding “almost exclusively through debt,” which she described as frustrating given the uncertain payoff timeline, according to Bloomberg.
The numbers behind that concern are large.
Oracle has US$248bn in lease commitments for data centres and cloud capacity over roughly the next 15 to 19 years as of November 30, up almost 148 percent from August, CNBC reported, citing the company’s filing.
By the end of November, Oracle owed more than US$124bn including operating lease liabilities, and in September it raised a further US$18bn in new debt.
That same month, OpenAI announced a US$300bn, five‑year partnership with Oracle.
Bloomberg said CreditSights analysts Jordan Chalfin and Michael Pugh described the US$248bn lease disclosure as a “bombshell,” noting it had jumped from US$100bn the prior quarter.
They said Oracle’s bond spreads have widened since earnings and that the debt is now trading “firmly” in high‑yield territory, yet they still see an attractive long‑term opportunity.
At the same time, they remain concerned about free cash flow burn, issuance needs, sustained high leverage, downgrade risk — particularly at Moody’s — and customer concentration risk tied to OpenAI.
Moody’s Ratings last Friday reaffirmed Oracle’s Baa2 senior unsecured rating and negative outlook, pointing to an “impressive” backlog but warning that counterparty risk and the scale of required spending “remain significant credit concerns.”
Moody’s said Oracle’s capex projections capture only part of the total AI infrastructure cost, with the rest financed via leases, special purpose vehicles and vendor financing.
Those structures reduce immediate cash outflows but mean liabilities will rise “much faster than the capex numbers imply,” according to Bloomberg.
Funding stress is also showing up at the project level.
Asset manager Blue Owl Capital had been in talks to back a US$10bn, 1‑gigawatt data centre for OpenAI in Saline Township, Michigan, but pulled out over unfavourable debt terms and repayment structures, according to CNBC’s account of Financial Times reporting and people familiar with the matter.
Those people also cited concerns that local politics could delay construction.
The Financial Times said Oracle’s rising debt and aggressive AI spending contributed to the breakdown in talks.
Oracle disputed that view, saying the project is “moving forward” and that Blue Owl “was not part of equity talks,” Oracle spokesperson Michael Egbert said in a statement reported by CNBC.
Related Digital, Oracle’s development partner, told CNBC it selected “the best equity partner from a competitive group of options.”
The firm called the idea that Blue Owl walked away “unequivocally false.” It added that the site is in pre‑construction, with work expected to start in the first quarter next year, and said the project has “strong support” from Michigan Governor Gretchen Whitmer.
The Financial Times has reported that Blackstone is in discussions to potentially replace Blue Owl as a financial partner, although no deal has been signed yet.
Blue Owl remains the primary investor in Oracle’s other large US data‑centre projects, including a US$15bn site in Abilene, Texas, and an US$18bn project in New Mexico, as per CNBC’s summary of FT reporting.
All of this plays into the broader AI trade.
Bank of America believes “the AI trade may still have room to run into 2026,” but warned that rising share prices do not rule out a bubble.
The bank’s analysts wrote that current market dynamics “validate our thesis that a larger AI bubble continues to build.”
For a Canadian wealth audience looking across both equity and credit, the key takeaway is not every AI winner is a balance‑sheet winner.
Oracle now stands as a live example of how quickly market enthusiasm can flip to hard questions about leverage, funding mix and who ultimately bears the risk of an AI build‑out measured in hundreds of billions of US dollars.
