Oracle Seeks Massive $50 Billion War Chest to Fuel AI Cloud Race, Despite Cash Flow Strain

(Bloomberg) -- In a bold bet on the unrelenting demand for artificial intelligence computing power, Oracle Corp. is preparing a massive financial offensive. The software giant announced plans Sunday to raise up to $50 billion through a mix of debt and equity to dramatically expand its cloud infrastructure, a move that underscores the staggering capital required to compete in the AI era.

The capital infusion is aimed squarely at fulfilling existing contracts with a who's who of the AI world, including Nvidia Corp., Meta Platforms Inc., OpenAI, and Elon Musk's xAI Corp. This pre-committed demand, the company stated, necessitates a rapid build-out of data center capacity.

However, this aggressive expansion comes at a steep financial cost. Data compiled by Bloomberg shows Oracle's free cash flow has turned negative due to its AI data center investments, a situation analysts expect to persist until at least 2030. The company's shares have also been under severe pressure, having halved from their peak last September, erasing hundreds of billions in market value amid broader investor skepticism over AI profitability.

"This isn't just growth spending; it's a survival check in the cloud arms race," said DA Davidson analyst Gil Luria. "Successfully raising this capital would be the first step in climbing out of a very deep, self-excavated hole."

The financing plan is split into two major parts. Roughly half, including up to $20 billion, is expected to come from equity-linked instruments like mandatory convertible preferred securities. Guggenheim analyst John DiFucci noted in a recent report that this equity component signals Oracle's commitment to preserving its investment-grade credit rating. The remaining $25 billion would be sought through a single, landmark bond issuance early next year, following a substantial $18 billion debt raise in 2025.

The strategy is not without significant risk. "The debt market may balk at another jumbo offering given Oracle's existing obligations and the signals from the credit default swap market," Luria cautioned, adding that massive equity issuance could further dilute existing shareholders and pressure the stock price.

Goldman Sachs and Citigroup have been tapped to lead the various offerings. The announcement's unusual Sunday timing, analysts suggest, may be a tactical move by management to stem the relentless stock slide and frame the narrative before Monday trading.

A focal point of concern is Oracle's landmark deal with OpenAI, which has committed to an estimated $300 billion in server rentals. With OpenAI itself not yet profitable, the long-term viability of such enormous, forward-leaning capital commitments remains a central question for investors fearing an AI bubble.

Market Voices:

"Finally, a concrete plan. The demand from their client list is real and locked in. This isn't speculative building; it's fulfilling orders. The short-term cash flow pain is the price of admission to the top tier of cloud providers." — Rebecca Shaw, Technology Portfolio Manager at Horizon Capital.

"It's a desperate Hail Mary. They're diluting shareholders and loading up on debt to chase a gold rush where no one is sure there's gold. Throwing $50 billion at a problem doesn't solve it if the underlying economics are broken. This reeks of panic." — Marcus Thorne, Independent Financial Analyst and frequent critic of Big Tech capex.

"The scale is breathtaking, but necessary. The alternative is ceding the entire AI infrastructure market to AWS, Azure, and Google. The equity component shows fiscal responsibility, and the contracted revenue provides a roadmap to eventual ROI, however distant." — Dr. Aris Mendes, Director of the Center for Tech Economics.

"My worry is the supply chain. This funding is for chips and real estate. Can the global ecosystem even support this pace of build-out? It might be a capital raise today and a logistical nightmare tomorrow." — Lin Chen, Supply Chain Strategist at TechIntel Advisory.

--With assistance from Mayumi Negishi and Mark Anderson.

(Adds analyst and market commentary throughout.)

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