The AI borrowing binge is back in the spotlight
With AI investment driving much of the economic growth in the U.S., Oracle's wobbles mean a lot.
TL;DR
- Oracle is attempting to delay lease payments on a delayed data center project in New Mexico, known as Project Jupiter, by citing force majeure.
- The company's credit rating is the lowest among hyperscalers, and its stock is down 30% for the year.
- Oracle bonds maturing in 2055 are trading at 77 cents on the dollar, and the cost of credit default swaps on Oracle debt has increased.
- The AI investment ecosystem is characterized by a 'bond binge,' 'off-balance sheet debt,' and 'circular financing,' with Oracle playing a key role in initiating borrowing for AI infrastructure.
- Project Jupiter faced delays due to local opposition and regulatory setbacks, contributing to Oracle's force majeure notice.