Oracle feels Nvidia shock
Oracle shares came under fresh pressure after reports about Nvidia CEO Jensen Huang. The New York Times reported a second affair, and The Wall Street Journal said his board was preparing to fire him. For Oracle, the Nvidia story lands at a bad time. The company has tied much of its growth story to demand for AI compute, and investors are already nervous about how it is funding that buildout. Oracle lost about $10 billion in market value in after-hours trading yesterday. The stock is down more than 10% over the past month and about 35% this year.
A budget spent in one day
On October 28, Oracle said new stock and bond sales through fiscal 2030, excluding refinancing, would be capped at $20 billion. On November 2, it agreed to sell 86 million new shares for $10 billion and priced $10 billion of bonds. That used the entire four-year budget in a single day. Borrowing is getting more expensive, too. In February, Oracle sold 2029 notes with a 4.6% yield. By November, notes with the same maturity year carried a 7% yield. The spread over Treasuries rose from 0.95 to 2.40 percentage points. Its 2046 bonds went from a 6.56% yield in February to 8.67% in November. Traders are also watching default risk. Oracle’s five-year credit default swaps traded near 305 basis points last week, up from 58 a year earlier.
Downgrade risk grows
S&P rates Oracle at BBB-, one notch above junk. Moody’s and Fitch are two notches higher, though Moody’s has a negative outlook. Any agency could cut the rating. S&P has said it could lower Oracle again if the company’s borrowing ratio stays above 4.5x or if positive free cash flow by fiscal 2029 looks out of reach. A Polymarket contract priced about a 36% chance of a cut to junk by June 30, 2027. The company also faces operating problems. Microsoft is winding down rentals of Oracle AI compute. Oracle’s OpenAI data center in New Mexico, Project Jupiter, has an open-ended permit delay. County officials warned backers about a possible contract breach, and buildings already built on the site lack power.
Revenue depends on one customer
Oracle’s revenue mix is thin. OpenAI contributes roughly half of its revenue backlog, according to the article. S&P warned that Oracle’s AI spending carries material credit risk and an uncertain path to positive cash flow. Oracle says demand remains strong, including for earlier-generation GPUs. Maybe. But with Nvidia turmoil, rising borrowing costs, and a stretched balance sheet, the market is no longer giving Oracle much benefit of the doubt.
