Oracle's $90 Billion AI Gamble Meets the Limits of Steel, Concrete and Power Lines

Oracle stock fell 28% year-to-date as Larry Ellison pledged 67 million more shares and the New Mexico AI data-center project hit permit delays.

Larry Ellison has pledged 67 million more Oracle shares as collateral for personal loans than a year ago — a stake worth roughly $9.2 billion, according to Bloomberg. The disclosure, which surfaced Friday, lands at an awkward moment for the software giant, as investors increasingly wonder how management intends to reconcile its founder's private financial commitments with the company's ballooning corporate obligations.

The stock closed Friday at €120.26, down 28% year-to-date and a striking 56% below its 52-week high. Behind that slide sits a widening gap between Oracle's ambitions in artificial intelligence and the physical, financial and regulatory realities standing in the way.

A Force Majeure Notice in New Mexico

At the center of the turbulence is Project Jupiter, a sprawling data-center campus planned for roughly 1,400 acres in New Mexico with a peak load of 2.45 gigawatts, designed primarily to serve OpenAI's computing needs. On Thursday, Oracle delivered a force majeure notice to the project's developer, a unit of Blue Owl Capital, preserving the option to defer payments should the facility fail to come online as planned in 2028.

Officially, the timeline still holds. On the ground, the picture is messier. The permit for a required gas pipeline has been rejected multiple times and has slipped by nearly six months, while air-quality approval for backup fuel cells from Bloom Energy remains pending. Morgan Stanley has warned of broader risks to AI infrastructure financing if construction delays begin to pile up.

The financing itself is already showing stress. As much as $20 billion in construction debt is tied to the New Mexico project, and those loans have been trading at discounts in the secondary market. Credit default swaps on Oracle have climbed to record levels, and the yield on a company bond maturing in 2056 has pushed past 8%. Media reports point to delays, litigation and an S&P downgrade weighing on Project Jupiter's credit.

Record Backlog, Record Burn

The paradox is that Oracle's core business has rarely looked stronger. Cloud infrastructure revenue jumped 120% in currency-adjusted terms, AI infrastructure utilization stands at 97.9%, and the company has shipped more than 300,000 graphics processors to customers. Its total order book has swelled to $664 billion.

Yet the cost of feeding that expansion is enormous. Two weeks ago, Oracle reported a record operating cash flow of $23 billion — against $28 billion in capital expenditures, leaving free cash flow at negative $5 billion. Management is holding firm on plans to spend between $90 billion and $95 billion on property and equipment in fiscal 2027, a figure that will require sustained external funding.

For fiscal 2027, the company is targeting total revenue of at least $90 billion and adjusted earnings per share of $8.10. For the second quarter of that year, the board expects revenue growth of 30% to 34%. Hitting those marks would turn today's heavy upfront spending into durable market share; missing them would leave the balance sheet exposed.

Software Pipeline Keeps Moving

Oracle is not standing still on the product side. On September 14, it launched an AI assistant for nursing staff in the United States, and a day later released Java 27 with new capabilities for AI inference — part of a push to broaden its software portfolio even as the infrastructure buildout consumes capital.

Wall Street's view has cooled at the edges. On September 11, BMO Capital Markets trimmed its price target to $195.00, and on September 17, Freedom Broker cut its own to $205.00. Both firms kept their positive ratings intact, signaling caution rather than retreat.

What the Next Quarter Will Reveal

The path forward now hinges on two variables: whether the data centers are completed on schedule and whether demand holds up. As long as cloud growth stays elevated and the projected second-quarter revenue increase materializes, the bulls retain a credible case. But if infrastructure financing wobbles or construction timelines in New Mexico slip further, the valuation faces fresh pressure.

The next hard checkpoint is the second-quarter earnings report, when investors will get a clear look at whether Oracle's massive capital outlays are keeping pace with its operational progress — or whether the digital future is being held back by analog constraints of power lines, permits and balance sheets.