AI's financial Jenga towers start to wobble

The financial stability of AI projects is being shaken as opposition to data centers threatens construction schedules. Oracle, a key player in the massive Stargate AI buildout spearheaded by President Donald Trump, is attempting to postpone lease payments for a data center in New Mexico. This delay has been caused by state officials denying permits for the necessary gas pipeline, which is crucial for powering the project.

The setback has been at least six months, highlighting how timing is critical in the infrastructure buildout that fuels the AI race.

The financial risks are significant. Joe Peiser, CEO of risk capital at insurance broker Aon, warns that a single element falling out of place could expose financial backers and insurers to losses much higher than anticipated. Oracle has received $18 billion in loans to build the New Mexico site, with an additional $3 billion in equity from Blue Owl. All of this hinges on Oracle making full and timely rent payments.

The stakes are even greater considering Oracle carries $288 billion in lease obligations, a sixfold increase from the beginning of 2025. While Oracle can defer rent, it must still pay for the project's ongoing costs, which are slightly lower. Postponing the lease extension guarantees longer cash flows for financial backers but may prove to be a short-sighted strategy. The recent $20 billion drop in Oracle's stock-market value underscores the potential pitfalls of such decisions.

This situation is reminiscent of the 2008 financial crisis, where an insurer's disputes over collateral posting turned a localized problem into a global catastrophe. Despite this, demand for AI-related investments continues to rise, allowing governments to borrow without overwhelming competition. Kristalina Georgieva, managing director of the International Monetary Fund, noted this at Semafor's Next 3 Billion event.