On July 12, S&P Global downgraded Oracle's credit rating from "BBB" to "BBB-", onlyFirst gear above junk class.S&P made it clear in its rating report thatOpenAI listed as Oracle's "critical credit risk", pointing out that Oracle's AI business is burning cash far beyond expectations – capital expenditure forecasts have been sharply raised to $95 billion in 2027 from $60 billion previously, while the corresponding revenue will not be cashed out for years.This downgrade directly reflects rising concerns about Oracle's financial resilience.
OpenAI accounts for about half of Oracle's $638 billion in contractual obligations. S&P warns,Once OpenAI has a business crisis, Oracle will face the dilemma that a large number of data center capacity cannot be digested, and the financial pressure will be sharply amplified.
At the same time, the market's doubts about OpenAI's own valuation are also spreading-it is reported that the size of SoftBank's loans collateralized by OpenAI's equity has been compressed from $10 billion to $6 billion because lenders are struggling to reasonably value the unlisted company, and at the end of last month, there were media reports that OpenAI's IPO plan has also been postponed to 2027.
AI business burns cash beyond expectations as capital expenditure gets out of control
The core basis for S&P's downgrade is the rapid expansion of Oracle's AI infrastructure investment. According to S&P's latest forecast, Oracle's capital expenditure will reach $95 billion by 2027, an increase of more than 50% from the previous estimate of $60 billion.The problem is that the return cycle for this huge investment is long. Standard & Poor's pointed out that it will take several years for the related income to land substantially, which means that Oracle will continue to be in a state of high-intensity cash consumption for a long time, and free cash flow will be under obvious pressure. For bond investors, this directly weakens Oracle's debt service buffer.
"BBB-" is the lowest tier of investment-grade ratings, and a downgrade of one level falls into the high-yield (junk) bond range.
According to the analysis, this position has a substantial impact on Oracle's financing cost and bond investor structure-some institutional investors who can only hold investment-grade bonds will be forced to reduce their holdings of Oracle bonds when their ratings are further downgraded.
This rating action is a noteworthy risk signal in the AI infrastructure investment boom:Large-scale capital expenditure combined with a highly concentrated customer structure is turning the excitement of the AI concept into quantifiable credit risk in the bond market.
In the meantime,S&P characterized OpenAI as Oracle's "key credit risk", which is supported by specific data.Among Oracle's total contractual obligations of $638 billion, one OpenAI customer accounts for about half, and the high concentration of customers is rare among large cloud service providers.
S&P's logic chain is clear:If OpenAI falls into financial trouble or even collapses, Oracle will be forced to undertake a large number of idle data center capacity, but there will be no corresponding income to cover operating and depreciation costs.Under this scenario, Oracle's balance sheet will suffer a severe impact.
S&P also pointed out that, by contrast,AmazonAWS,GoogleAndMicrosoftIt has a large internal workload to absorb excess capacity when external demand declines, and all three have stronger financial reserves. Even so, S&P admits that if OpenAI really falls, the balance sheets of the above-mentioned technology giants will also be severely impacted.
Concerns about OpenAI don't just come from S&P.According to reports, SoftBank's loans arranged against OpenAI equity have been forced to cut from $10 billion to $6 billion because lenders struggled to price the privately held company reasonably. This detail reveals that there is considerable uncertainty about the actual valuation of OpenAI by institutional investors amid the AI boom.
In the meantime,Wall Street InsightsThe previous article wrote that OpenAI's IPO plan has been delayed until 2027, meaning the market will still not be able to verify its valuation by open market prices for quite some time. For Oracle's creditors, this uncertainty will persist and constitute an ongoing source of credit stress.
