Global technology giant Oracle Corporation is experiencing a dramatic reversal of fortune on Wall Street, with its artificial intelligence-driven stock surge completely evaporating amid growing concerns about the company's massive debt load and substantial capital expenditure requirements.
The AI Hype and Subsequent Crash
Oracle's stock witnessed an extraordinary surge in September 2025, skyrocketing more than 30% after the company disclosed a staggering $317 billion revenue backlog. The Wall Street Journal later revealed that most of this backlog originated from a massive deal with AI research company OpenAI, sending investors into a frenzy about Oracle's AI prospects.
However, the euphoria proved short-lived. Since that September peak, Oracle has lost all those gains and then some, marking the first time in nearly four decades as a publicly traded company that Oracle has completely surrendered such a significant one-day gain. According to Dow Jones Market Data, while Oracle has posted one-day gains of 30% or more three other times in its history, it had never faded back to its pre-pop close until now.
The Mounting Debt Crisis
The stock decline represents only part of Oracle's challenges. The company is facing a substantial financial burden as it races to build the infrastructure needed to serve OpenAI and other AI customers. Oracle recently sold approximately $18 billion in new investment-grade bonds, pushing its total outstanding debt load beyond the $100 billion mark.
This massive debt makes Oracle the most indebted big tech company with an investment-grade rating. Despite this borrowing spree, Oracle continues to burn cash and will need to borrow billions more to meet its dividend payments and capital-spending commitments. The company declined to comment on its financial situation when approached by journalists.
Credit Rating Concerns and OpenAI Dependency
Major credit rating agencies are growing increasingly concerned about Oracle's financial health. Both Moody's Ratings and S&P Global Ratings have moved closer to potentially reclassifying Oracle's bonds as junk debt, which would significantly increase the company's borrowing costs.
Analysts point to Oracle's heavy reliance on OpenAI as particularly worrying. The AI startup forecasts its operating losses will swell to approximately $74 billion by 2028, representing roughly three-fourths of its revenue, due to ballooning computing costs. This raises questions about OpenAI's ability to fulfill its massive financial commitments to Oracle.
According to credit analysts at Morgan Stanley, Oracle's adjusted debt—which includes lease obligations alongside traditional debt—is projected to more than double to roughly $300 billion by 2028. This alarming projection has made investors increasingly skeptical.
Rishi Jaluria, an analyst at RBC Capital Markets, captured the market sentiment perfectly: "The market has gone into 'you have to prove this to me' territory."
The risks are substantial enough that data center fund manager Blue Owl Capital now charges Oracle higher rents than it charges other tenants like Meta Platforms to offset the perceived higher risk of contracting with the company.
Despite these concerns, Oracle executives remain optimistic. Chief Executive Clay Magouyrk, who leads Oracle's cloud-infrastructure business, expressed confidence in an October CNBC interview that OpenAI would meet its commitment to pay Oracle what could amount to approximately $60 billion annually over five years. Magouyrk also stated his belief that there will be multiple winners in the AI race.
Oracle has emphasized that it has contracts worth tens of billions with non-OpenAI customers, including Meta, suggesting a more diversified client base than some critics acknowledge.
The cost of protecting Oracle's bonds against potential default has risen significantly in recent weeks. The spread on Oracle's five-year credit-default swaps has more than doubled since mid-September to about 1.1 percentage points, though this remains relatively low in absolute terms.
Morgan Stanley credit analysts noted in September that Oracle's long-term creditors might be buying credit-default swaps to hedge their exposure, while others could be using them to express skepticism about the broader AI capital expenditure trend.
As Oracle navigates this challenging period, the company's ability to manage its substantial debt while delivering on its AI promises will be closely watched by investors and industry observers alike.
