Oracle's $18B Data Center Loan Trades at Discount, Banks Bid 89-91 Cents on Dollar

According to a recent report by the Financial Times, Oracle's (ORCL) approximately $18 billion loan is under pressure. Syndicate banks, including Santander and Jefferies, are currently quoting these loans at 89 to 91 cents per dollar of face value.

Last night, Oracle shares fell 2% against the market trend, with recent performance significantly weaker than the broader AI sector.

Oracle Debt Struggles to Sell

The loan is tied to Oracle's Project Jupiter (JUNS) data center in New Mexico. Reports indicate that bank quotes have dropped to 89–91 cents per dollar of face value. The campus is part of the collaboration between Oracle and OpenAI, as well as the $500 billion Stargate AI infrastructure initiative, which was funded last year by a bank syndicate.

Key details:

• The "Project Jupiter (JUNS)" campus is located in Doña Ana County and covers 1,400 acres
• It is part of a broader cooperation agreement between Oracle and OpenAI aimed at providing AI computing power
• The project secured an $18 billion loan from a bank syndicate late last year to initiate construction
• Efforts by banks to sell this debt to a wider investor base have stalled due to market concerns about Oracle's increasing borrowings and weakening credit profile

The New Mexico data center campus is part of the Stargate plan, a $500 billion AI infrastructure development initiative jointly led by OpenAI, SoftBank Group, and Oracle, aiming to build large-scale AI infrastructure across the United States.

After S&P downgraded Oracle's corporate credit rating in July this year, it now stands only one notch above junk status. The Financial Times noted that banks are currently forced to retain more Oracle-related special-purpose debt on their balance sheets than originally planned.

Oracle continues to increase spending to drive expansion in its AI infrastructure business, but the rising debt burden has attracted growing attention from investors. Oracle estimates that capital expenditures for fiscal year 2027 could reach up to $95 billion, while expecting to recover no more than $25 billion from clients.

OpenAI's Pressure

Beyond Oracle, OpenAI's financial pressures have also been exposed. According to the Financial Times, OpenAI stated in a company presentation that it expects negative free cash flow totaling $278 billion from 2026 through the end of 2030.

According to a source familiar with the matter, these figures emerged from a private presentation made by the company in July regarding a computer transaction. The source declined to disclose specific financial numbers. The Financial Times reported that although the company expects revenue to grow from $36 billion in 2026 to $350 billion in 2030, it is heavily investing in computing capacity, with expenditures projected to far exceed these earnings.

Broader AI Investment Landscape

To date, AI investment continues to expand, but funding is not without bottlenecks:

• The combined 2026 capital expenditure guidance from the top five U.S. cloud computing companies exceeds $750 billion, expected to surpass $1.1 trillion in 2027
• By 2030, cumulative AI capital expenditure may reach $5.5 trillion
• JPMorgan (JPM) forecasts that the investment-grade corporate credit market will provide over $2.1 trillion in financing for data centers over the next five years, with high-yield bonds and leveraged loans contributing an additional approximately $350 billion

However, the sustained rise in government bond yields in Europe and the U.S. recently may imply that fiscal supply and term premiums could be more significant than AI investment itself. A New York Fed survey shows that the 10-year U.S. Treasury term premium has risen to approximately 125 basis points, reflecting persistent market concerns about long-term U.S. fiscal sustainability. JPMorgan believes that the primary contradiction in the current market has shifted to whether earnings and AI investment can continue to outpace interest rate pressures.