Shares of Oracle dropped 4.1% to $137.69 after the Wall Street Journal reported that the company is negotiating with Apollo Global Management and Goldman Sachs to finance AI chips for a massive 1-gigawatt data center. Under the proposed structure, private investors would fund an off-balance-sheet entity to buy the chips and lease them back to Oracle, allowing the cloud provider to expand capacity without further overleveraging its corporate balance sheet. The move spotlights a central tension: Oracle's AI ambitions are growing faster than its ability to pay for them.
$169 Billion in Debt and Counting
Oracle's total debt has climbed from $99.5 billion in November 2024 to $169.1 billion by August 2026, against just $37.1 billion in cash and short-term investments.
Bondholders sued in January, alleging Oracle understated how much more it would need to borrow when it sold $18 billion of bonds in September 2025. The chip-leasing framework is an attempt to add computing power without adding more bonds — but investors clearly read it as confirmation that the balance sheet is strained.
Cash Flow Can't Keep Up with the Buildout
In fiscal 2026, Oracle spent $55.7 billion on capital expenditures against $32.0 billion in operating cash flow, producing negative $23.7 billion in free cash flow.
The company now expects capital spending of $90 billion to $95 billion for fiscal 2027, meaning the funding gap will only widen without outside help. That math explains why Oracle is turning to private credit instead of traditional bond markets.
A $664 Billion Backlog — Heavily Concentrated Oracle bulls point to a massive order book. The backlog stands at about $664 billion, with roughly $300 billion tied to OpenAI. That demand validates the spending spree, but concentration in a single customer introduces risk: any delay or renegotiation could reshape Oracle's revenue trajectory. The stock has fallen almost 30% in 2026 even as cloud revenue and contracted backlog reached record levels.
Private Credit Is Becoming AI's Central Banker
AI-related borrowing in U.S. leveraged finance markets has jumped from about $20 billion in early 2025 to $88 billion in 2026. Oracle isn't alone — Broadcom and SpaceX are chasing similar mega-deals. But the sheer scale raises a systemic question: if private lenders are backstopping the entire AI hardware cycle, any tightening in those markets could slow buildouts industrywide. For Oracle, already carrying the heaviest debt load among major cloud providers, the margin for error is razor-thin.