Oracle shares gained 5% in pre-market trading on Wall Street after the data center giant announced plans to raise up to $50 billion by 2026 to invest in the Artificial Intelligence challenge. Oracle's intention is therefore to develop additional capacity to meet the demand of its cloud customers, including Nvidia, Meta, OpenAI, AMD, TikTok, and xAI. The financing, which will be between $45 billion and $50 billion, will be raised through debt and equity, including the issuance of convertible shares and a new $20 billion equity market program.
Initially, after the announcement, the stock of the group led by Larry Ellison was falling, given the concerns about the Oracle's massive investments in artificial intelligence and the debt incurred to support them. The development of artificial intelligence data centers has in fact driven Oracle's free cash flow into negative levels, where it is expected to remain until 2030, according to data collected by Bloomberg. The company will have to incur tens of billions of dollars in expenses in the coming years.
It is also recent news in this regard that Oracle has been sued by a group of bondholders They claim they suffered losses due to the company's failure to disclose the need to issue significant additional debt to finance its AI infrastructure. The proposed class action lawsuit, filed in Manhattan state court, concerns investors who purchased $18 billion in Oracle securities issued on September 25. The issuance occurred just two weeks after the announcement of a five-year, $300 billion deal to provide computing power to OpenAI.
According to the indictment, investors were “caught off guard” when, just seven weeks later, Oracle returned to the capital markets to raise further 38 billion dollars in Loans, needed to finance two data centers to support the deal with OpenAI. "The bond market's reaction to Oracle's additional debt was swift and abrupt," the complaint states. The announcement of the new debt caused a decline in prices and an increase in returns Oracle stocks, as investors perceived increased credit risk.
