As part of its $300 billion cloud compute contract with OpenAI, Oracle may need to borrow roughly $100 billion over the next four years to build the datacenters required, according to KeyBanc's projections.
KeyBanc Capital Markets reportedly estimates that Big Red may need to raise about $25 billion a year in debt over the next four years if it intends to build all the extra cloud compute infrastructure required as part of a deal the company signed with OpenAI earlier this month. Where that funding will come from is anyone's guess, but it makes this one of the largest deals in AI look increasingly like one propped up by debt that, were the AI bubble ever to pop, could mean a lot of unpaid bills.
The OpenAI agreement sent Oracle shares soaring earlier this month after the company confirmed the deal in its Q1 FY26 earnings call, which indicated that its total remaining performance obligations (RPO - a backlog of contracted revenue still to be delivered and recognized) ballooned by 359 percent year-over-year to reach $455 billion.
As reported by the Wall Street Journal, the financial soothsayers at KeyBanc don't think Oracle has anywhere near enough cash to build out the infrastructure. It's going to need to earn the bulk of that RPO - and with good reason. Oracle had around $82.2 billion in long-term debt as of Aug. 31, plus $18 billion worth of bonds it put on offer in September to fund its AI-fueled expansion plans.
According to Big Red's most recent earnings statement, Oracle has around $10 billion worth of cash and equivalents on hand, and around $9 billion of debt due within a year. Additionally, Oracle's free cash flow has declined 152 percent YoY on the back of a massive increase in capex, with the company spending $8.5 billion in Q1 26, up from $2.3 billion a year earlier.
Oracle isn't the only company going deep into debt to fuel its AI ambitions, though. Its Stargate partner OpenAI is raising hefty capital as well.
As ratings firm Moody's pointed out earlier this month when it expressed concern over the Oracle/OpenAI deal and its financial feasibility, Oracle's debt is just as concerning as the "counterparty risk" that OpenAI might not be able to pay its bills if and when Oracle actually goes $100 billion into debt to build all that infrastructure in the next four years.
OpenAI, no matter its structure, has yet to turn a profit. As we pointed out when the Oracle deal was announced, OpenAI's annual recurring revenue is just $10 billion (although it's claimed it could book $20 billion this year) - and that's before you take debts into account to get to an as-yet-to-turn-positive net profit. OpenAI isn't expected to become cash-flow positive until the end of the decade, leaving it with little to do to fund its Oracle-backed dreams aside from seeking more investors.
One firm's AI debt is another firm's cash to pay back its own AI debt, it seems.
If that sounds to you a lot like the growth-over-profit model that presaged the dot-com collapse, you're not alone in thinking so. The Oracle/OpenAI deal has led many to opine that Sam Altman is fast becoming the driving force behind a likely collapse. Even he himself called AI a bubble, albeit one he believes is worth inflating.
OpenAI's payments to Oracle for its infrastructure buildout, fueled by the expected $100 billion in debt Big Red will be taking on over the next four years, are set to begin in 2027. That means there may be a pin waiting to pop that bubble in 18 months or so if the financing falls through. With most big customers yet to see clear ROI on their AI investments, the bubble could very well pop before then.
Oracle didn't respond to comments for this story. ®
Source: The register