Oracle Corporation's shares have been under significant pressure this year, falling more than 40% from their January peak and becoming one of the worst performers in the S&P 500. The decline reflects growing concerns about the company's debt load and the viability of its massive AI infrastructure projects.
A key worry is the $18 billion in loans tied to Oracle's "Project Jupiter" data center in New Mexico. According to recent reports, these loans are now being quoted at 89 to 91 cents on the dollar by major syndicate banks such as Santander and Jefferies. That discount signals that debt investors are increasingly worried about the project's future, as healthy loans typically trade near par.
Project Jupiter is central to Oracle's AI ambitions. It involves a 1,400-acre site and is part of the company's $300 billion contract with OpenAI, the creator of ChatGPT. However, the project has faced significant local opposition ahead of the upcoming election, and a power supply issue has emerged after permission to connect a pipeline to feed Bloom fuel cells was blocked. These challenges have made it difficult for Oracle to offload the debt, adding to investor jitters.
The debt strain comes on top of broader concerns about Oracle's rising leverage and declining creditworthiness. The company's total debt has climbed as it invests heavily in cloud infrastructure to compete with rivals like Amazon and Microsoft. Meanwhile, AI spending fears have weighed on the stock in recent sessions.
Adding to the uncertainty, Oracle's founder and chairman Larry Ellison recently announced plans to sell $7.5 billion worth of shares, only to abruptly cancel the sale without explanation. That move has fueled speculation that Ellison may be concerned about further downside in the stock.
Despite these headwinds, Oracle's latest quarterly results were relatively strong. Revenue jumped 30% in the first fiscal quarter to $19.3 billion, with the cloud division contributing $11.6 billion. The company's remaining performance obligations (RPO) surged to $664 billion, including $300 billion from OpenAI. Analysts expect revenue to grow 34% this year to $90.46 billion, and to reach $131 billion next year.
However, technical analysis suggests the stock may have more room to fall. The daily chart shows Oracle has broken below its ascending trendline and the 50-day moving average. The Relative Strength Index (RSI) has dipped below the neutral 50 level, and a rising wedge pattern—often a bearish signal—has formed. If the pattern plays out, the stock could drop to the $100 support level as debt concerns persist.
Investors are also watching the broader AI landscape. Oracle's AI backlog has hit $664 billion, but the market is questioning whether such massive spending will translate into sustainable profits. The company's heavy reliance on a few large customers, including OpenAI, adds concentration risk.
In the near term, the outcome of the New Mexico project and Oracle's ability to manage its debt will be critical. The recent OpenAI valuation talks have provided some relief, but the debt market's reaction to Project Jupiter suggests that risk premiums are rising.
This article is for informational purposes only and does not constitute financial advice.
