US equity indexes have surged incredibly since the emergence of AI, with many experts attributing the gains primarily to growth in AI stocks and robust earnings results. However, analyst David Desjardins is concerned that a major tech market collapse is inevitable, with Oracle likely to be the ‘first domino to fall.’
Oracle shares fell 43.6% in the past year, as further pressure mounted on the stock after S&P Global downgraded the company’s credit rating to BBB- last week. This rating is just above junk bond status. Desjardins believes this downgrade could be the beginning of the end for Oracle.
Why? Because when a public firm’s credit rating is downgraded to junk, its borrowing costs surge and stock prices generally tank as institutional investors avoid junk bonds, ultimately reducing the company’s access to funding. The credit rating agency noted that Oracle’s ‘growing AI infrastructure business is diluting its strong business risk profile.’
Oracle has been securing massive loans to build data centres to power AI, but a collapse could destroy Oracle and take down the AI market with it, according to Desjardins. The company has been a globally renowned software firm, but it is rapidly positioning itself as a data centre compute provider, resulting in a ballooning debt. The credit rating downgrade significantly increases the risks of Oracle failing to raise more money to continue funding the AI infrastructure buildout.
For context, Oracle spent an astronomical $55.7 billion on its data centre base in fiscal 2026, with spending expected to surge by 70% to a $90 billion in fiscal 2027. However, capex in 2024 was only $6.9 billion. At the same time, the company’s cash flow is now negative $23.7 billion in fiscal 2026 compared with a positive $11.8 billion in fiscal 2024, implying that Oracle’s balance sheet is deteriorating at an alarming rate.
According to the S&P Global, Oracle, which was once ‘a highly cash-generative software and database company, has become highly dependent on external capital to fund its aggressive AI infrastructure buildout.’
Oracle’s Extreme Dependence on OpenAI’s Success
Meanwhile, Desjardins is concerned that Oracle’s success is now nearly 100% dependent on OpenAI’s performance as the companies signed a historic cloud computing deal in September 2025, where OpenAI would buy $300 billion in computing power over five years, starting in 2027.
Now, OpenAI totally relies on capital markets remaining open to help meet its monumental financial obligations, but if OpenAI faces any hiccups in raising money, it could also drive Oracle towards ‘the eye of the storm,’ according to Desjardins.
Oracle plans to raise another $40 billion through a debt-equity mix to continue its infrastructure buildout, but Desjardins continues to worry more about the company linking its entire future to a single-high-stakes client (OpenAI).
According to filings with the US Securities and Exchange Commission, Oracle has $638 billion in future contract volume on its books, with 50% of that from OpenAI alone. Even the S&P views Oracle’s dependence on OpenAI as a major issue, describing OpenAI as a ‘central credit risk’ for Oracle.
OpenAI is attempting to secure its future through a highly anticipated stock market IPO to raise funding that it needs to survive and keep paying Oracle and other clients.
If OpenAI fails to secure this funding and meet payment obligations, Oracle’s debt will be completely exposed, and it would be left with long-term data centre rental agreements that ‘could neither be easily terminated nor transferred to other customers on comparable terms.’
Disclaimer: Our digital media content is for informational purposes only and does not constitute investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks, and past performance does not guarantee future returns.