Can Oracle sustain its AI ambitions with $108 billion in debt and lenders running scared?

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Oracle was planning to build a massive $10 billion AI data center in Michigan with OpenAI as part of their Stargate. initiative.

But Blue Owl Capital, the investment firm financing it, just walked away from the deal.

The reason? Oracle’s debt has exploded to $108 billion and lenders are getting nervous about whether the company can actually pay it all back.

Blue Owl demanded much tougher lending terms and rather than accept those terms, Oracle essentially shelved the project for now.​​

This matters because Oracle has been spending money aggressively to compete in AI.

The company signed a $300 billion contract with OpenAI that doesn’t generate revenue until 2027, meaning they’re burning cash upfront with no returns yet.

Oracle’s credit profile is deteriorating rapidly, the company’s CDS spread (the cost of insuring against default) has climbed to 151 basis points, the highest level since 2009.

Markets are now pricing in a probability of Oracle defaulting at greater than 12%, which is a red flag.

The bigger picture is that AI infrastructure financing is tightening.

Everyone talks about energy being the constraint on AI buildout, but this situation shows that financing is critical.

If major investors start backing away from funding these multi billion dollar projects due to debt concerns, it could slow down the entire race to build AI computing capacity.