S&P downgrades Oracle to BBB – only one notch above junk level (www.heise.de)

S&P Global has downgraded Oracle's credit rating from BBB to BBB-, placing it just one notch above junk status. This decision, announced on July 9, highlights the risks associated with Oracle's aggressive expansion into AI infrastructure, which has led to significant increases in debt and capital requirements. S&P forecasts a staggering deficit of nearly $42 billion in free operating cash flow for Oracle in the 2027 fiscal year, exacerbated by rising component costs for essential tech like GPUs. To fund this deficit, Oracle will likely need to rely on a combination of new debt and equity. Oracle's transformation into a major player in cloud infrastructure, expected to make up nearly 60% of its total revenue by 2028, has raised concerns about its financial health amidst intense competition with giants like Microsoft and Google. More critically, Oracle's substantial reliance on OpenAI as a primary customer poses a “central credit risk,” with projections suggesting that half of the company's contractually promised service volume hinges on OpenAI's success and continued financial stability. As Oracle navigates this precarious landscape, industry analysts highlight a troubling trend of debt-burdened investments in AI, drawing parallels to past financial crises, which may serve as a warning sign for the broader tech community.