Oracle to raise $50 billion as AI debt piles up
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Oracle plans to raise up to $50 billion in cash through equity and debt sales in 2026 to build more capacity in its cloud Infrastructure business, doubling down on spending to serve the AI economy.
Why it matters: Concerns about debt tied to AI projects are billowing as tech giants rush to build the systems needed to fuel their AI ambitions.
Driving the news: Oracle plans to raise $45 billion to $50 billion in gross cash to finance its buildout — which it says is necessary to meet contracted demand from its largest cloud customers.
- The bond deal portion is expected to fetch $20 billion to $25 billion, Bloomberg reported.
The big picture: It's a growth bet made amid rising questions about the long-term sustainability of Big Tech's massive AI spending.
- Firms like Oracle, Meta, Google and CoreWeave have increasingly tapped debt markets to finance AI buildouts — raising investor eyebrows.
- Bond yields for major tech borrowers have climbed, and trading in credit default swaps has surged as investors assess the risks behind the AI boom, Axios Markets author Mady Mills recently reported.
Threat level: If profits fail to materialize and companies pull back on AI spending, some firms that financed heavily to meet demand could struggle to service their debt.
- The tech sector is expected to issue up to $1.5 trillion over the next few years in new debt finance AI and data center projects, Morgan Stanley and JPMorgan analysts projected.
- That "could strain corporate bond markets, widening spreads and heightening volatility," BNY Mellon senior investment strategist Theodore Bair Jr. wrote in December.
Between the lines: Oracle is scrambling to deliver the data processing capacity it's promised to mega customers like ChatGPT creator OpenAI and Facebook owner Meta.
- That's hung a black cloud over the stock the last few months as investors grow increasingly concerned with Oracle's ability to meet its datacenter buildouts, Wedbush Securities analyst and tech bull Dan Ives wrote Monday in a research note.
What they're saying: Ives said the fundraising shows Oracle is "doubling down on its AI efforts" and is intent on remaining a major player in what he called the "fourth Industrial Revolution."
- Other analysts have praised the plan for a balanced mix of equity and debt.
Market impact: Oracle shares closed down 2.5% Monday.
The intrigue: Investors were rattled by a WSJ report over the weekend that Nvidia could be backing off its plan to invest $100 billion into OpenAI.
- That prompted a statement from Oracle Monday, which counts OpenAI as its own key customer. "We remain highly confident in OpenAI's ability to raise funds and meet its commitments," it said.
What to watch: Whether $50 billion is enough.
- Oracle said it "does not expect to issue additional bonds during calendar year 2026 beyond this transaction" and expects to maintain an investment grade credit rating.
