Oracle Stock Falls 4% as AI Data Center Faces $18B Debt and Cost Crisis

Oracle shares fell 4% on Thursday, after reports that the company sent a force majeure notice related to its Project Jupiter data center campus in New Mexico, seeking protection against certain costs if the facility is delayed beyond its planned 2028 start date.

The development adds to investor scrutiny of Oracle’s debt-funded artificial intelligence infrastructure expansion.

The notice was sent to the project’s developer, a unit of Blue Owl Capital. Oracle is not seeking to abandon the project but is attempting to delay payments if the campus does not begin operations as planned in 2028, according to people familiar with the matter.

Oracle told CNBC, “Project Jupiter remains on our planned schedule. We are fully committed to New Mexico and confident in our path forward.”

The development comes days after reports that about $18 billion of loans tied to Project Jupiter had been quoted at 89 to 91 cents on the dollar by banks, reflecting pressure around the financing of the large-scale data center. The project has also faced regulatory and local opposition, adding uncertainty around its construction and power plans.

$18 Billion Project Jupiter Financing Faces Pressure

Project Jupiter is a major data center campus in Doña Ana County, New Mexico, designed to provide computing capacity for Oracle’s artificial intelligence infrastructure. A group of about 20 banks provided an $18 billion loan to help finance construction of the campus.

The financing has come under scrutiny as banks have sought to distribute the debt more broadly. Earlier in September, the loans were being quoted at 89 to 91 cents on the dollar, according to people familiar with the matter.

The financing concerns come as Oracle continues to invest heavily in data center capacity. The company spent $28.5 billion on capital expenditures in the first quarter of fiscal 2027, compared with $8.5 billion in the year-earlier quarter. Free cash flow was negative $5.4 billion for the quarter.

Oracle ended Aug. 31 with about $125 billion in notes payable and other borrowings, according to its latest Form 10-Q filed with the U.S. Securities and Exchange Commission. The filing also disclosed $288 billion in additional lease commitments, substantially all related to data center arrangements, that were not reflected on the company’s balance sheet.

Oracle’s AI Demand Continues to Grow

The financing pressure is occurring alongside rapid growth in Oracle’s cloud infrastructure business.

Oracle reported record first-quarter fiscal 2027 revenue of $19.3 billion, up 30% from a year earlier. Cloud revenue increased 62% to $11.6 billion, while cloud infrastructure revenue more than doubled, rising 121% to $7.4 billion.

Remaining performance obligations, a measure of contracted revenue yet to be recognized, reached $664 billion at the end of the quarter, up $209 billion from a year earlier. Oracle said it booked more than $30 billion of additional AI cloud contracts during the quarter.

The company has also said that the structure of many large AI contracts reduces the amount of capital it needs to raise. In some agreements, customers prepay for GPUs or purchase and supply the hardware themselves. Oracle said those arrangements accounted for $75 billion of its AI contracts at the end of fiscal 2026.

On the Q3 earnings call in March, Co-CEO Clay Magouyrk said, “Multicloud database revenue grew 531% year-over-year. AI infrastructure revenue grew 243% year-over-year. Both also have demand that exceeds supply and a clear execution plan from Oracle that will rapidly turn that demand into profitable recurring revenue.”

By Q4, Magouyrk struck a similarly expansive note. He described the AI infrastructure market as making existing cloud infrastructure “look small,” characterizing the market as worth “trillions of dollars per year” and saying Oracle Cloud Infrastructure (OCI) should grow into an “extremely large and extremely profitable business.”

Capital Spending Remains a Key Investor Focus

Oracle’s fiscal 2026 capital expenditures reached $55.7 billion, up from $21.2 billion a year earlier. The spending contributed to negative free cash flow of $23.7 billion for the full fiscal year.

Oracle raised $43 billion through debt financing and $5 billion through equity financing in fiscal 2026. The company said in June that it expected to raise approximately $40 billion through debt and equity financing in fiscal 2027, including a previously announced $20 billion at-the-market equity issuance.

Oracle completed the $20 billion common-stock sale through its at-the-market program during the first quarter of fiscal 2027, according to its latest results.

The company’s latest filings show that the financing requirement extends beyond conventional debt. Oracle’s $288 billion of additional data center lease commitments are generally expected to begin between the second quarter of fiscal 2027 and fiscal 2029, with terms ranging from 15 to 19 years.

Project Delays Add Another Risk

Project Jupiter has faced regulatory and infrastructure obstacles as Oracle works to build out capacity for AI workloads.

The New Mexico project has encountered setbacks involving permits and energy infrastructure. The project is designed to support a large amount of power-intensive computing capacity, making the availability of electricity and related infrastructure important to its planned 2028 launch.

Oracle’s force majeure notice does not mean the company is exiting the project. Instead, according to Bloomberg’s report, the notice is intended to provide contractual protection if circumstances outside Oracle’s control prevent the data center from becoming operational on schedule.

“This notice does not change the financial commitments to this multi-year project,” Blue Owl Capital said in a statement to CNBC.

The latest development puts Oracle’s rapid AI infrastructure expansion against two competing trends, such as customer demand and rising requirements for capital, power and data center capacity.

Oracle’s first-quarter results showed that cloud infrastructure demand remained strong, with revenue growth of 121% year over year. The capital expenditures reached $28.5 billion for the quarter and free cash flow remained negative.

The Project Jupiter financing adds another layer of scrutiny because the $18 billion loan is tied directly to a major data center project whose construction and operating timeline has faced external challenges. The force majeure notice provides contractual protection if the project is delayed, while Oracle continues to maintain that the campus remains on schedule.

The next key developments include progress on Project Jupiter’s permits and power infrastructure, the treatment of its project financing and Oracle’s ability to fund its broader data center expansion while converting its large AI contract backlog into revenue and cash flow.