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Oracle Data Center Loans Face Steep Drop
19 Sep
Summary
- Oracle's $18 billion loan for AI data center faces significant devaluation.
- Local opposition over water and air quality threatens Oracle's AI build-out.
- Concerns over Oracle's creditworthiness stall debt sales.
Approximately $18 billion in loans associated with an Oracle-leased data center in New Mexico have experienced a significant drop in value, with quotes ranging from 89 to 91 cents on the dollar. This situation arises amidst growing local concerns about the project's potential impact on water supply and air quality.
These concerns could impede Oracle's substantial AI infrastructure development. The "Project Jupiter" campus in Doña Ana County is crucial for Oracle's agreement with OpenAI to provide AI computing capacity.
Efforts to distribute this debt among a wider investor base have faltered. This is attributed to worries about Oracle's escalating debt and declining creditworthiness, evidenced by an S&P downgrade in July. Consequently, banks are holding more of this project debt than initially anticipated.
Oracle has been increasing its expenditures to support its AI infrastructure expansion, a move that has drawn increased scrutiny from investors regarding its rising debt levels.
