By Rashika Singh
Feb 2 (Reuters) – Oracle shares fell about 4% in pre-market trading on Monday after it announced plans to raise $45 billion to $50 billion this year to expand its cloud infrastructure, fueling investor concerns about its growing debt load.
The software company, chaired by billionaire Larry Ellison, said “the fundraising was aimed at expanding cloud capacity to meet contract demand from major customers such as AMD, Meta, Nvidia, OpenAITikTok and AI.
As companies continue to expand capacity despite limited visibility into potential returns, investors are wondering whether “increased AI-related spending” in the technology sector would generate sustained demand.
“The perception is that Oracle’s fortunes are now heavily tied to OpenAI and, combined with the company’s plans to raise up to $50 billion to invest in 2026, nervousness about the situation is unlikely to go away anytime soon,” said Russ Mould, chief investment officer at AJ Bell.
Oracle said it aims to achieve the funding target through a roughly equal mix of equity and debt, including equity-linked securities, common stock and a new market program of up to $20 billion, as well as the issuance of senior unsecured notes planned for early next year.
Bernstein analysts said the combination of debt and equity should support Oracle’s investment-grade credit rating and reduce uncertainty about the timing and cost of future financing.
The company is facing increased scrutiny after a recent lawsuit filed by bondholders in January and last year’s rise in the costs of its credit default swaps.
The cost of insuring Oracle’s debt against default jumped in December last year to its highest level in at least five years.
Analysts at Jefferies said the financing plan “buys time” for Oracle’s AI ambitions, but warned it could weigh on margins in the short term, and said free cash flow was unlikely to turn positive before FY29.
(Reporting by Rashika Singh in Bengaluru; Editing by Shilpi Majumdar)
