Oracle Corp. shares fell 5.4% on Wednesday following reports that Blue Owl Capital will not provide funding for its $10 billion Michigan datacenter, even as the cloud computing company disputed the account and insisted negotiations with its development partner remain on track.
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The Financial Times reported that Blue Owl, Oracle's primary datacenter partner, had withdrawn from discussions to back the planned 1-gigawatt (GW) facility in Saline Township, Michigan, designed to serve OpenAI. Blue Owl had typically arranged up to $10 billion in financing for such projects through special purpose vehicles that own the facilities and lease them to Oracle.
Oracle called the report "incorrect," stating it is working with development partner Related Digital and that "final negotiations for their equity deal are moving forward on schedule and according to plan." Related Digital echoed this, saying the notion Blue Owl walked away was "unequivocally false," though neither company named the current equity partner involved. Blackstone Inc. is now in talks to provide the equity capital, while Bank of America Corp. is leading a roughly $14 billion debt deal for the project, Bloomberg cited people familiar with the matter.
The selloff underscores deepening concerns about Oracle's ability to finance its aggressive data center buildout as its cash flow trends negative, with the company committed to $248 billion in lease obligations as of November. The episode has rattled broader confidence in the artificial intelligence (AI) infrastructure boom, sending other AI names lower and pushing Oracle's credit-default spreads (CDS) near their highest levels since 2009.
Blue Owl Cites Unfavorable Terms
Blue Owl considered the lease and debt terms for the Michigan project unfavorable compared to other deals, Bloomberg learned from a person with direct knowledge. The firm was also concerned about potential construction delays stemming from Michigan's political climate, where a bipartisan group of lawmakers is seeking to repeal tax incentives for data centers.
Blue Owl remains involved in two other Oracle sites, including a $15 billion facility in Abilene, Texas, and an $18 billion campus in New Mexico. The firm has pioneered project-finance packages for tech companies' datacenters, typically structured with 80% debt and 20% equity, where the equity investor and developer own the site while Oracle provides a long-term lease. Blue Owl's targeted returns on the Abilene project reach as high as 25%, the Financial Times quoted a person close to the deal.
Analysts Call Selloff Overdone
Despite the negative headlines, some Wall Street analysts believe the market reaction has become excessive.
Evercore ISI analyst Kirk Materne called the fixation on Oracle's data center timing "almost irrelevant" to valuation, noting the stock has collapsed to levels reflecting a worst-case scenario. Oracle shares are down 45% from their mid-September high, having given back all gains from the announced $300 billion OpenAI deal.
Josh Wein, portfolio manager at Hennessy Funds, described Wednesday's selloff as an "overreaction," though he acknowledged investor difficulty in determining "when these data centers are going to be built, when they're operational and when they start cash flowing."
The biggest question remains how Oracle plans to finance its buildout. On last week's earnings call, the company said funding requirements would be under $100 billion but provided no specifics.
Oracle at Center of $500 Billion AI Lease Boom
Oracle has become the largest player in a $500 billion datacenter lease spree across cloud computing companies. The company committed $150 billion new leases in just the three months ending November, bringing total commitments to $248 billion -- far exceeding peers like Meta Platforms Inc. at $58 billion and Google at $42.6 billion.
This aggressive expansion is part of the Stargate project, spearheaded by OpenAI, SoftBank Group Corp., and Oracle to invest $500 billion in AI infrastructure across the U.S. However, Oracle’s cloud business is small compared to Amazon.com Inc., Microsoft Corp. and Google, giving it "massive single-customer exposure” through its $30 billion-a-year OpenAI deal, said Ed Galvin, founder of DC Byte.
Financing Concerns Shake AI Trade Confidence
Oracle's mounting debt has created counterparty exposure across Wall Street. The company had about $105 billion in net debt including lease obiligations at the end of November, up from $78 billion a year earlier. Morgan Stanley forecasts this will soar to about $290 billion by 2028. Oracle's five-year CDS have more than doubled since late September.
"The broader issue is that the market no longer has the same automatic 'buy the dip' cushion on AI exceptionalism it enjoyed earlier in the year," said Michael Ball, Bloomberg Macro Strategist. "Negative views on Oracle have become synonymous with sentiment for the broader Nasdaq Index."
Other AI stocks fell in sympathy Wednesday, with Broadcom down 4.5%, Nvidia down 3.8%, AMD down 5.3%, and CoreWeave falling 7.1%.
