Oracle’s $18 billion data center debt under pressure, FT reports

About $18 billion in loans associated with an Oracle-leased data center, known as Project Jupiter, in New Mexico are facing pressure, according to the Financial Times. The loans are trading at 89 to 91 cents on the dollar with assistance from banks like Santander and Jefferies. This $18 billion loan was secured late last year to initiate construction on the 1,400-acre campus, which is part of Oracle's broader agreement with OpenAI to provide AI computing capacity.

The New Mexico data center is a part of the Stargate initiative, a $500 billion endeavor to build AI infrastructure across the United States, led by OpenAI, SoftBank Group, and Oracle.

Efforts to sell the debt to a larger investor base have stalled due to concerns over Oracle's increasing borrowing and weakening creditworthiness. Oracle's corporate credit rating is currently one notch above junk, as downgraded from S&P in July. This has resulted in banks being forced to hold more Oracle-linked project debt on their balance sheets than initially anticipated.

Oracle has been increasing its spending to finance its expansion into AI infrastructure, and its rising debt has attracted growing investor scrutiny. The company has forecast up to $95 billion in capital expenditure for fiscal 2027, although it expects repayments from customers for up to $25 billion. Oracle's corporate credit rating, its actions to fund expansion, and the scrutiny surrounding its debt are all key factors in the current pressure on these loans.