Oracle Corp. is ramping up AI investment with a $250 billion data center expansion, but the heavy spending is straining its finances and threatening its investment-grade credit rating. S&P Global Ratings has downgraded the company to BBB-, just above junk, while Moody’s Ratings maintains a negative outlook, citing sustained cash burn and rising capital needs.
Unlike rivals such as Alphabet Inc. and Meta Platforms Inc., which generate strong cash flows to fund AI expansion, Oracle is burning more than $20 billion annually after capital expenditure. This imbalance, along with rising borrowing costs, has pushed its bonds closer to high-yield territory, increasing investor concern over its funding strategy.
To manage the strain, Oracle is exploring measures including customer prepayments and additional debt and equity issuance. However, analysts warn the company may face difficult trade-offs between maintaining credit quality and sustaining AI growth, with risks of higher borrowing costs or reduced competitiveness if spending is curtailed.