Investor anxiety has led to a recent decline in the price of Oracle’s corporate bonds, pushing their yields higher. This market reaction is primarily driven by concerns over the company’s vast spending and increasing debt levels required to fund its ambitious Artificial Intelligence (AI) infrastructure buildout.

Debt-Fueled AI Bet

The core concern is that Oracle’s capital expenditures are currently outpacing its operating earnings as it races to secure future profits through high-value contracts with AI partners like OpenAI.

Key financial points fueling the investor nervousness include:

• Existing Debt: Oracle is carrying a substantial debt load, reported to be around $104 billion.
• New Borrowing Plans: Reports suggest Oracle is planning to take on an additional $38 billion in debt specifically to finance its AI cloud expansion.

The scale of this spending has prompted credit analysts to question the sustainability of the strategy and how Oracle expects to generate sufficient returns from these investments.

Broader Accounting Scrutiny

The scrutiny of Oracle’s finances is part of a wider industry discussion about the accounting practices of large technology firms making massive AI investments.

Noted investor Michael Burry has raised a red flag, suggesting that major tech companies, including Oracle, may be manipulating their financial appearance by stretching the depreciation schedules for their new data centers. This accounting method could potentially make short-term reported profits appear smoother or inflated.

Furthermore, industry experts point out that the operational life of modern data center technology is decreasing rapidly. Infrastructure could become technologically obsolete in as little as three to four years, meaning companies must achieve significant profits in a very short window to justify and pay off the colossal initial investment costs.

While some analysts view the recent bond sell-off as a minor, temporary “bump in the road” for the financially resilient company, the pressure reflects a growing demand from investors for clarity on the long-term financial payoff of the current, aggressive AI arms race.