Oracle’s era of aggressive expansion has resulted in a financial hangover. S&P Global has downgraded the IT giant’s credit rating from 'BBB' to 'BBB-', leaving it just one step above junk status. According to S&P Global analysts, OpenAI is now officially considered a primary credit risk for Larry Ellison’s company. The core issue is that Oracle’s AI business is burning through liquidity faster than it generates revenue, while its appetite for capital expenditures is growing exponentially.
The numbers reveal a frightening gap between debt obligations and reality. According to the S&P Global report, Oracle’s capital expenditures are projected to hit $95 billion by 2027, significantly exceeding earlier forecasts of $60 billion. Meanwhile, OpenAI accounts for nearly half of the company’s $638 billion in total remaining performance obligations. While the market traditionally views a bloated backlog as a sign of strength, S&P Global warns of a critical lack of diversification. In essence, Oracle is building 'smart' farms for a single tenant.
Key Risks for Investors
Excessive capital concentration: Nearly 50% of obligations are tied to a single client. Rising capital expenditures: Forecasts increased from $60 billion to $95 billion by 2027. Vulnerability to competitors: Lack of internal capacity to utilize idle hardware. OpenAI IPO delay: Pushing the public offering to 2027 increases liquidity pressure.
This structural vulnerability makes Oracle an outlier among cloud hyperscalers. Unlike AWS, Google, or Microsoft, the company lacks comparable financial reserves or the massive internal workloads needed to absorb vacant server capacity during a crisis. If Sam Altman’s startup falters, Oracle will be left with a mountain of specialized hardware and no one to rent it to.
The situation is further exacerbated by news that SoftBank has slashed its loan facility backed by OpenAI shares from $10 billion to $6 billion due to valuation difficulties. Against the backdrop of OpenAI’s IPO being pushed to 2027, the risk of a cash flow gap for Oracle is becoming tangible. If the anchor tenant of the world’s most expensive data centers fails to meet its goals on time, investors will have to answer a difficult question: who will pick up the $95 billion bill for hardware that risks becoming high-tech scrap metal.