Oracle falls on plans for new debt to fund AI chips

Oracle shares fell on Thursday following a report by The Wall Street Journal detailing how enterprise cloud providers are preparing to tap debt markets to finance artificial intelligence infrastructure. Oracle is in talks with Apollo and Goldman Sachs to structure financing and wants to complete a transaction as soon as this year. Under the planned structure, investors would fund a separate entity to purchase chips, which Oracle would lease over time to avoid taking on direct corporate debt.

The financing talks come as Oracle's capital spending reached $28.5 billion in the June-to-August quarter. That figure is up from $2.3 billion in the same quarter two years earlier. The stock has dropped nearly 30% this year amid the infrastructure expansion.

Oracle has increasingly relied on the bond market to fund its build-out. According to Bloomberg, the company has nearly doubled its long-term debt to more than $160 billion over the past two years, making it the fifth-largest corporate borrower in the United States.

Market pressure intensified after reports showed OpenAI's annualized revenue is running $20 billion below prior estimates. OpenAI is one of Oracle's major cloud customers, for which Oracle constructs data centers. Oracle's total contract backlog reached $664 billion last quarter.