Oracle’s recent decision to accrue $18 billion in debt intends to back extensive datacenter projects to satisfy the increasing needs of AI model developers and corporate clients. This financial maneuver comes on the heels of Oracle’s announcement of sky-high cloud contracts yet to be fulfilled, totaling $455 billion. However, Moody’s casts doubt over this approach, citing massive costs involved in acquiring data center equipment, facilities, and utilities, perceiving even leases as debt-like liabilities.

Oracle’s CEO, Safra Catz, alluded to newfound cloud deals with entities like OpenAI, Meta, and others, underscoring the company’s AI focus. Reports indicate OpenAI might be committing a $300 billion purchase over five years, fueling its ambitions using Oracle’s infrastructure. Additional collaborations include cloud services for TikTok in the U.S. and participation in governmental AI projects.

The feasibility of Oracle’s strategy hinges on client solvency to service its debt, a concern amplified by doubts around where their funding will originate. While some customers have adequate cash flow, uncertainties shroud others like OpenAI, which rely on investor backing, including Microsoft.

Industry analysts warn of a looming $800 billion shortfall in reaching AI’s anticipated $2 trillion revenue by 2030. The shift to cloud infrastructures, alongside potential tech savings, appears insufficient to meet the projected demands, placing intense financial pressure on Oracle’s AI endeavors. Moody’s acknowledged the potential in Oracle’s AI ventures but warned of prolonged high leverage threatening its cash flow stability.