Oracle The session opened higher amid plans to raise $50 billion for artificial intelligence infrastructure. Alerts investors after closing lower Who is this infrastructure for?
company explain Late Sunday, the company planned to raise up to $50 billion in debt and equity in 2026 to provide additional data center capacity to its cloud customers. The market initially reacted well, with Oracle shares rising about 2% in early trading, as investors took the announcement as confirmation that demand for artificial intelligence infrastructure remains strong and has contracted. The market seems confident that Oracle actually has a plan to solve its sketchy problems. $100 billion debt load.
As Oracle’s price fluctuated slightly at $168, its social media team added relevant content.
“Nvidia’s deal with OpenAI has zero impact on our financial relationship with OpenAI,” the company said. release exist X. “We remain confident in OpenAI’s ability to raise capital and deliver on its commitments.”
The market’s reaction was swift and brutal. Rather than projecting the expected confidence, the article sent a negative signal to investors already anxious about Oracle’s debt.
“This is literally the language banks run in,” venture capitalist Alex Kolicich wrote on X.
Minutes after the news was released, Oracle’s stock price began to plummet, closing down 2.79% to $160.06. By trying to prove its independence, Oracle is instead reminding everyone how exposed it is and how risky it is.
To be fair, Oracle’s five-year credit default swap also fell 17%a sign that investors are more confident in the company’s ability to manage debt and avoid credit rating downgrades. The question is why the stock market also plummeted.
Microsoft and NVIDIA Both companies saw share prices decline related to their OpenAI exposure, as investors sent a message that they were bullish on artificial intelligence but not necessarily on the maker of ChatGPT.
Nvidia is expected to make a significant equity investment in OpenAI and may commit up to $100 billion in OpenAI’s next funding round. but Weekend reports show The deal has stalled and was never actually binding, with CEO Jen-Hsun Huang adding credibility to the report by emphasizing that the funding was “never a commitment” and only reached the letter of intent stage. He said that each of Nvidia’s investments in OpenAI will be decided in stages.
yellow reiterate Nvidia will “absolutely participate” in OpenAI’s funding round, which may be Nvidia’s “largest investment” yet amounting to less than $100 billion. Microsoft shares lost $360 billion last week as investors lost $360 billion AI spending levels are bleak. Although Microsoft significantly beat expectations, the sell-off appears to have penalized the information it disclosed: 45% (nearly $250 billion) of its $625 billion commercial backlog is related to OpenAI. Meanwhile, revenue growth for Microsoft’s artificial intelligence cloud computing has stalled, suggesting there may not be a cliff in sight for the revenue needed to finance Microsoft’s own debt.
How to Price Private Companies in the Open Market
There is growing evidence that OpenAI, once viewed as an engine of growth, is now viewed as a source of inherent risk. For several months, Investors rally over any announcement OpenAI and tons of data: bigger data centers, bigger chip orders, bigger contracts. Amazon,Microsoft, GoogleNvidia all got a huge boost, based on a simple assumption: if OpenAI needs it, the demand must be worth funding. While critics will complain about the “revolving finance” of these deals, the general assumption is that everyone will eventually be paid, either through the power of their own value inflation or through appropriate income.
This assumption is starting to break down. The problem is that OpenAI, as a private company, does not disclose any of the risk pricing information that the market relies on when dealing with members of the Big Seven. Investors are starting to get scared.
open artificial intelligence Already committed Approximately $1.4 trillion is spent on computing, power and infrastructure, while generating annual revenue of just over $20 billion. The idea is to fill the gap with continued fundraising; larger investors with higher valuations and a shrinking pool of investors also benefit from OpenAI’s growth. But now the model is coming under highly sensitive scrutiny.
Nvidia only exacerbates this unease. When Huang stressed that Nvidia’s massive investment in OpenAI was non-binding, it raised a question that goes well beyond Nvidia: If OpenAI’s funding is haphazard or delayed, what happens to the infrastructure that’s already been built to meet anticipated demand?
This question is by far the most important for companies like Oracle or Microsoft that have leveraged to meet this exact need.
Oracle isn’t waiting to see if OpenAI raises its next round of funding. It has borrowed money, it has built, and it has committed to spending years ahead of cash flow, and if it doesn’t succeed, it could be caught with a hot potato on its hands. That’s why investors hear sounds of despair when a company feels the need to publicly claim that a counterparty can “raise capital and meet its commitments.”