Oracle Corp.'s credit rating was cut to BBB- by S&P, one step above junk, due to a $250 billion AI data-center expansion that outpaces its revenue. Moody's also has a negative outlook. While rivals like Microsoft maintain top-tier credit ratings, Oracle's colossal spending has damaged its finances and led it to increasingly rely on the bond market for funding.
Oracle credit downgrade
- ▪Moody's Ratings has a negative outlook on Oracle, meaning another credit cut is possible in the medium term
- ▪S&P Global Ratings cut Oracle Corp.'s credit rating to BBB- on July 9, placing it one step above junk status
- ▪S&P Global stated that Oracle's finances had been deteriorating
Ellison media empire expansion
- ▪David Ellison is also engaged in a contested $111 billion bid to take over Warner Bros. Discovery.
- ▪With backing from his father's Oracle wealth, David Ellison has taken control of Paramount
- ▪Wealth from Oracle is enabling founder Larry Ellison and his son, David Ellison, to expand into the media industry
AI infrastructure spending surge
- ▪Oracle's spending on AI is described as "colossal," causing the company to burn cash faster than it generates revenue
- ▪Oracle is in the midst of a $250 billion data-center expansion to support its artificial intelligence ambitions
Corporate debt financing pressures
- ▪Oracle is increasingly selling bonds to raise money for its AI data centers
- ▪The value of Larry Ellison’s holdings in Oracle has decreased by approximately $230 billion since September
Hyperscaler financial comparison
- ▪Microsoft holds a Triple-A credit rating, which is higher than that of the U.S. government
- ▪Other tech giants, or "hyperscalers," like Alphabet, Microsoft, Amazon, and Meta are also major investors in data centers
- ▪These competing hyperscalers are considered to have stronger underlying finances than Oracle
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