A significant financial strain has emerged for silicon valley giant Oracle, with its roughly $18 billion loan portfolio now under considerable pressure, according to recent reports. This development led to a 2% decline in the company's stock price on Wednesday, marking a notable underperformance against the broader AI sector's recent momentum.
The core issue stems from Oracle's Project Jupiter data center campus in New Mexico, where the associated $18 billion in debt has seen its market value slip. Bank quotes now place the debt at 89 to 91 cents on the dollar, translating to a market valuation between $16.02 billion and $16.38 billion for the outstanding loans. This facility is a key component of the collaboration between Oracle and OpenAI, forming part of the ambitious $500 billion Stargate AI infrastructure initiative. The funding was secured from a syndicate of banks late last year to initiate construction.
Growing concerns over Oracle's increasing borrowings and weakening credit profile have stalled banks' efforts to offload this debt to a broader investment audience. The New Mexico facility is central to the Stargate plan, a colossal $500 billion project spearheaded by OpenAI, SoftBank Group, and Oracle, aimed at constructing AI infrastructure on a massive scale across the United States.
Adding to the pressure, Oracle's corporate credit rating was downgraded by Standard & Poor's in July, leaving it just one notch above junk status. Consequently, banks are now compelled to retain a larger volume of Oracle-related project debt on their balance sheets than originally planned.
Beyond Oracle, OpenAI is also confronting significant financial hurdles. Reports indicate that OpenAI has projected a negative free cash flow of $278 billion between 2026 and the end of 2030. This forecast was presented in a private company deck during a computer transaction negotiation in July. While OpenAI anticipates revenue to surge from $36 billion in 2026 to $350 billion by 2030, its aggressive investment in computing power means expenditures will far outpace these earnings.
In a related development, Anthropic may postpone its public listing. According to reports, the AI company is now planning its initial public offering for November, which is later than many investors had predicted. This timing shift comes as leaders of major AI firms advocate for a more measured pace of technological advancement. Sources indicate that Anthropic had previously aimed for a record-breaking offering in October.
The AI investment landscape continues its rapid expansion, yet capital is not without its limitations. The five leading U.S. cloud computing companies have guided combined capital expenditure exceeding $750 billion for 2026, with projections surpassing $1.1 trillion by 2027. Cumulative AI capital spending could reach $5.5 trillion by 2030. According to JPMorgan's projections, the investment-grade corporate credit market will provide over $2.1 trillion in financing for data centers over the next five years, with high-yield bonds and leveraged loans contributing an additional $350 billion.
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