“That’s a huge credit and liability risk for Oracle. Their biggest customer, their biggest customer by far, is a venture-funded startup,” said Andrew Chang, a director at S&P Global.
OpenAI faces questions about how it plans to meet its commitments to spend $1.4 trillion on AI infrastructure over the next eight years. It has struck deals with several big tech groups, including Oracle’s rivals.
Of the five hyperscalers, which include Amazon, Google, Microsoft and Meta, Oracle is the only one with negative free cash flow. Its debt-to-equity ratio has risen to 500 percent, far more than Amazon’s 50 percent and Microsoft’s 30 percent, according to JPMorgan.
While all five companies have seen their cash-to-asset ratios decline significantly in recent years amid a spending boom, Oracle’s is by far the lowest, JPMorgan found.
JPMorgan analysts noted a “tension between [Oracle’s] aggressive AI development ambitions and the limits of its investment grade balance sheet.”
Analysts have also noted that Oracle’s data center leases are for much longer than its contracts to sell capacity to OpenAI.
Oracle has signed at least five long-term leasing agreements for US data centers that will ultimately be used by OpenAI, resulting in $100 billion in off-balance sheet leasing commitments. The sites are at varying levels of construction, and some are not expected to begin construction until next year.
Safra Catz, Oracle’s sole CEO from 2019 until she resigned in September, resisted expanding her cloud business because of the huge expenses required. She was replaced by co-CEOs Clay Magouyrk and Mike Sicilia as part of Oracle’s pivot to a new era focused on AI.
Catz, who is now executive vice chairman of Oracle’s board, exercised stock options and sold $2.5 billion of his shares this year, according to U.S. regulatory filings. It had announced plans to exercise its stock options at the end of 2024.
© 2025 The Financial Times Ltd.. All rights reserved. It must not be redistributed, copied or modified in any way.
#Oracle #suffered #hard #blow #Wall #Street #technology #selloff #huge #bet
