Oracle’s Stock and Bonds Reel from AI Spending Fears: $100B Debt Load and OpenAI Bets Fuel Investor Jitters
As Oracle stock AI spending fears grip Wall Street in December 2025, the cloud giant’s shares have cratered 45% from their September peak, shedding another 14% in the past week alone after a bruising earnings report that exposed ballooning AI capex and shaky returns. But it’s not just equities in the crosshairs—Oracle bonds AI debt woes have sent yields soaring, with some investment-grade notes now trading like junk bonds and credit-default swaps (CDS) hitting levels unseen since the 2009 financial crisis. Amid broader AI hyperscalers debt concerns, Oracle’s aggressive pivot to AI infrastructure is testing investor patience, raising red flags on whether the tech boom’s physical and financial limits will capsize the rally.
The trigger? Oracle’s December 10 fiscal Q2 earnings, where revenue hit $15.1 billion (up 8% YoY) but cloud infrastructure sales missed estimates at $2.3 billion, short of the $2.5 billion forecast. Worse, quarterly capital expenditures exploded to $12 billion—nearly 50% above the $8.25 billion analysts expected—pushing full-year FY2026 guidance to $50 billion, a $15 billion hike from September projections. Much of this firepower is funneled into data centers for its blockbuster $300 billion, 15-year OpenAI partnership, announced in September, which alone accounts for a chunk of Oracle’s $523 billion remaining performance obligations (RPO). Yet, with cloud bookings flatlining at $97 billion and guidance for Q3 revenue at just $14.8-$14.9 billion (below $15.2 billion consensus), the math isn’t adding up fast enough.
Enter the debt dilemma. Oracle’s balance sheet now groans under $100 billion in total liabilities, swelled by an $18 billion jumbo bond sale in September—one of tech’s largest ever—and ongoing issuances. Collectively, the “Big Five” AI hyperscalers (Oracle, Google, Meta, Amazon, Microsoft) have tapped debt markets for $121 billion this year to bankroll data-center blitzes, per Bank of America analysis—a fourfold surge from historical norms. But while peers boast AA/A credit ratings, robust free cash flow (e.g., Microsoft’s $70B+ annually), and diversified client bases, Oracle’s BBB rating leaves it vulnerable. Its CDS spread, a barometer for default risk, spiked to 150 basis points post-earnings—the highest since 2009—signaling lenders’ qualms over repayment amid AI’s uncertain payoff timeline.
Physical bottlenecks amplify the peril. Oracle’s U.S. data-center rollout, including the mammoth $160 billion Project Jupiter in New Mexico, faces multi-year delays: Transformers now take 4-5 years (up from 1-2), industrial gas turbines 6-7, and skilled labor shortages have pushed some OpenAI-dedicated sites from 2027 to 2028 openings. “The AI boom is slamming into physics,” notes data-center researcher Jonathan Koomey, whose work underscores the mismatch between software’s warp-speed evolution and hardware’s plodding buildout. For Oracle, late to the AI infrastructure party versus AWS or Azure, this means over-reliance on OpenAI as a “single whale customer”—a $300 billion commitment that’s now a double-edged sword if generative AI hype cools or if rivals like xAI siphon demand.
Analysts are dialing back optimism. JPMorgan’s Erica Spear dubbed Oracle a “show me story,” warning bond pressures will linger into 2026 as investors demand proof of RPO conversion to revenue. At least 13 brokerages slashed price targets post-earnings, with Citi’s Tyler Radke forecasting $20-30 billion in annual debt raises through 2028. “Oracle’s debt-fueled bet is high-risk in a cycle where lenders crave certainty over capex sprints,” Spear told Bloomberg. Even bulls like Motley Fool’s contributors flag the “overleveraged” vibe: If AI spending stalls—amid fears of an “AI bubble” per Capital.com’s Kyle Rodda—Oracle’s $100B debt could morph from accelerator to anchor, especially with free cash flow lagging peers at just $4.5 billion quarterly.
For U.S. investors, the fallout stings across portfolios. Oracle’s tumble dragged AI darlings like Nvidia (down 5%) and Micron (off 7%), nixing any nascent “Santa Rally” as Fed rate cuts fail to offset valuation jitters. Economically, it spotlights the $1 trillion+ AI infra race’s hidden costs: Higher borrowing could inflate tech premiums, squeezing consumer gadgets and cloud services prices in a 2026 slowdown. Lifestyle ripple? Enterprises delaying AI migrations might stall productivity gains hyped as the boom’s holy grail. Politically, it fuels antitrust scrutiny on Big Tech debt monopolies, echoing dot-com echoes.
Yet, glimmers persist: Oracle’s software core churns $10B+ quarterly profits, and RPO signals pent-up demand—if executed. As Rodda muses, 2026’s litmus test is AI’s productivity punch; for Oracle, it’s proving the dragon’s not devouring its tail. Bonds and shares may wobble, but in the AI arms race, hesitation could cost the crown.
By Mark Smith
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