"A research note from TD Cowen states that finding equity and debt investors are increasingly questioning how Oracle will finance its datacenter building program to support its $300 billion, five-year contract with OpenAI. The bank estimates the OpenAI deal alone is going to require $156 billion in capital spending."
"This year, "both equity and debt investors have raised questions about Oracle's ability to finance this build-out as demonstrated by widening of Oracle credit default swap (CDS) spreads and pressure on Oracle stock/bonds," the research note adds. CDSes offer the buyer some insurance against a debt default. The price of the financial instruments insuring against defaults for five years tripled for Oracle in the final months of last year, says TD Cowen, which is says is an indication of a perceived increase in risk."
"TD Cowen estimated the OpenAI build-out alone - Oracle is also building for Meta and Nvidia in a $523 billion total commitment - would require around 3 million GPUs and other IT equipment, suggesting capital investment of $156 billion. The research note says US banks had pulled back from Oracle-linked datacenter project lending while private operators leasing to Oracle were also struggling to secure financing, impeding the leasing option in its build-out plan. In September, Oracle issued $18 billion in bonds and raised borrowing elsewhere."
Oracle faces potential workforce reductions of up to 30,000 and a possible sale of health-tech unit Cerner to raise funds for AI datacenter financing. Estimates place capital spending for the OpenAI contract at roughly $156 billion, with the broader commitment for OpenAI, Meta and Nvidia near $523 billion. The build-out would require around 3 million GPUs and other IT equipment. Widening credit default swap spreads and pressure on stock and bonds indicate increased investor concern and perceived default risk. US banks have pulled back from project lending while leasing partners struggle to secure financing, complicating funding options. Oracle issued $18 billion in bonds and may need significant annual borrowing to fund the program; Asian banks appear more relaxed about the risk profile.
Read at Theregister
Unable to calculate read time
Collection
[
|
...
]