Oracle unveils $50B fundraising plan to fuel AI data center ambitions – News

Oracle Corp. has given investors another reason to be nervous after revealing a plan today to raise between $45 billion and $50 billion this year, in order to fund the buildout of more data center capacity for artificial intelligence workloads.

The cloud infrastructure and database giant said it will raise the money via a combination of debt and equity sales, so it can meet contractual demand for computing resources from customers including OpenAI Group PBC, Meta Platforms Inc., Advanced Micro Devices Inc., Nvidia Corp., xAI Corp., TikTok and others.

Investors have become increasingly wary over the massive AI-linked infrastructure investments made by big technology companies over the last year, and they’re particularly concerned about Oracle, which has taken on large amounts of debt in order to fund its new data center projects. Its stock has fallen more than 50% after hitting a record high on Sept. 10, wiping out more than $460 billion from its market capitalization.

In a statement Sunday, Oracle said it will raise half of the proposed amount from equity-linked and common equity issuances, which include mandatory convertible preferred securities, and an at-the-market equity program. The other half will come through a single issuance of bonds early this year. It comes after the company borrowed $18 billion in 2025 through an earlier corporate bond offering.

One of the issues investors have with Oracle is that its ability to repay its mounting debt is likely to be dependent on the fortunes of OpenAI, which has committed to spending around $300 billion on its cloud infrastructure. However, the ChatGPT maker is currently bleeding cash to the tune of billions of dollars per year, despite its $500 billion market valuation, and has not yet announced a clear plan that could see it become profitable in the long term. It’s entirely dependent on its ability to raise private funding.

That’s why a substantial number of investors have balked at Oracle’s ambitions. Earlier this month, the company was sued by a group of bondholders who claim they have suffered significant losses because it concealed the fact it would need to sell additional debt to fund its data center investments.

While Oracle’s stock has been plummeting, investors have simultaneously been piling into credit-default swaps, which are instruments that offer a hedge against a potential default by Oracle on its loans. Meanwhile, the cost of insuring Oracle’s debt against default has risen to its highest level in over five years.

If investors are worried, analysts are less concerned about Oracle’s spending, pointing to the long-term viability of its infrastructure investments regardless of what happens to OpenAI. Last month, when reports emerged that one of Oracle’s key financial backers had declined the opportunity to fund the construction of a new, $10 billion data center project in Michigan, Constellation Research analyst Holger Mueller said it would likely be able to find alternative financiers, because OpenAI isn’t the only AI bet in town.

The analyst said that if the worst happens and OpenAI is unable to make good on its commitments to Oracle, it would instead find plenty of takers among enterprise customers. “Enterprise AI dollars would no longer have to compete with consumer AI dollars, token prices would become much cheaper, making AI much more affordable to everyone,” Mueller explained. “So it wouldn’t be a bad outcome for enterprises, and their cloud providers would also benefit from their increased business. For long-term-thinking investors, it’s all good.”

Photo: Valeriya ZankovychAdobe Stock