Oracle's bonds maturing in 2056 traded at yields above 8% after the company invoked "force majeure" to delay payment on its Project Jupiter data center campus. The move rattled AI stocks broadly, but Oracle's finances and rival hyperscalers' AI spending both remain intact.
Oracle made news last week by invoking "force majeure" in a bid to delay payment on the Project Jupiter data center campus it is developing. The financial world reacted fast: shortly after, the company's bonds maturing in 2056 traded at yields above 8%.
That news weighed on AI stocks broadly, but it shouldn't have. Oracle has asserted that its 2.45-gigawatt New Mexico data center will be completed on time, and that its financial obstacles do not reflect the entire AI industry.
Other hyperscalers are doing just fine
Microsoft, Alphabet, Amazon, and Meta Platforms are going full steam ahead with their AI build-outs. Meta Platforms' quarterly profits are in line with Oracle's annual profits, while Oracle would need several years of profits to match the net income of any of the other three hyperscalers in a single quarter.
Access to capital is not a problem for those hyperscalers. Microsoft, for example, has said its AI capital expenditures in fiscal 2027 will be entirely supported by free cash flow. Alphabet's bonds maturing in 2060 now carry yields above 6% — normal for corporate debt further out on the maturity curve.
Oracle itself isn't struggling. The company produced $4.7 billion in net income in its most recently reported quarter, fiscal 2027 Q1, more than 60% year-over-year growth. Its interest expenses reached 8% of revenue in that quarter, up from 6% of revenue a year earlier — an increase, but not one that warrants panic.
AI demand is still surging
Consumer demand for AI products remains high. Over its first 12 days of availability, Meta Platforms' Muse was downloaded at a faster rate than ChatGPT was over its comparable period, signaling demand remains hot for AI models.
Chipmakers are still reporting strong revenue growth, inking multiyear sales agreements, and building large order backlogs. Not every chipmaker, cloud platform, or software company will win in the AI build-out, and some of today's leaders will be left behind. Oracle still holds a large market share and may complete its data center on time. However, if Oracle needs to slow down because of financing issues, other companies will pick up the slack.
Source: The Motley Fool
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