The AI industry’s effort to build as many data centers as possible has spurred trillions in global debt.
If that worries you, prepare to get even more worried. Oracle said in its earnings report on Wednesday that it would raise another $40 billion in the next fiscal year through debt and equity financing, on top of the $43 billion in debt that it raised in the past fiscal year.
With well above $100 billion, Oracle is one of the top debt issuers in the AI race. The money is meant to account for the record amounts of cash it has spent and plans to spend on the unprecedented AI infrastructure buildout the company is undertaking. In the past fiscal year alone, Oracle’s capital expenditures came in at $55.7 billion, more than $5 billion higher than previous estimates, which were already deemed a hefty commitment considering it was roughly double what it spent in the year prior.
A year ago, Oracle’s dedication to spending money on AI would have made investors sing. Last year, President Trump announced Stargate, a program that would see Oracle build AI data centers worth 7 gigawatts of planned capacity, aka the capacity to power more than 5 million homes. Oracle’s new position at the center of this AI gold rush got the stock soaring so much that it briefly made Oracle co-founder Larry Ellison the richest man in the world.
But that was then, and this is now. The company’s increased reliance on debt markets started to spook experts at the end of last year as the Stargate data center projects got hit with delays. Then, the company’s financial commitments turned its free cash flow negative, where experts predict it will stay until 2030. In a move that analysts think was meant to offset some of this, Oracle laid off thousands of employees earlier this year.
Oracle is not only a major builder of America’s AI infrastructure, but it is also considered a bellwether of market confidence in AI, and investor reaction to its earnings report on Wednesday was yet another instance showing market uncertainty of AI investment returns. Despite record revenues in the past fiscal year, Oracle’s capital expenditure and debt increases were enough to send the stock down more than %10 in after-hours trading.
Now the greater concern is that if Oracle’s AI infrastructure buildout experiences any hiccups or if its customers, and mainly its most significant customer OpenAI, are unable to pay Oracle for the infrastructure it provides, then it won’t be able to pay for this mounting debt. The fallout from that possibility wouldn’t just impact Oracle but would likely kick off a domino effect that could engulf the entire American economy.
To make the situation even stickier, things are not looking 100% neat for OpenAI, which is swiftly losing ground to its top competitors Anthropic and Google and burning through cash without turning over a profit. Earlier this year, numerous reports claimed that OpenAI CFO Sarah Friar was worried about revenue growth and unsure if OpenAI would be able to pay for its many computing contracts, which, if it were to be the case, would include its $300 billion deal with Oracle.
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