Oracle (ORCL) has encountered a setback in its artificial intelligence (AI) infrastructure expansion, as financing for a planned multi-billion dollar data center project faces uncertainty. According to informed sources, Blue Owl Capital, originally slated as a major investor, has decided to withdraw its support for the project in Saline Township, Michigan, which is planned to have a capacity of 1GW and is intended to serve OpenAI. Blue Owl’s exit has cast doubt on the project’s funding sources. Although Blackstone has engaged in discussions to potentially take over the investment, no agreement has been signed yet. Following the news, Oracle’s stock price declined, dragging down the broader technology sector.
Oracle subsequently responded, stating that negotiations for the project are proceeding as planned and overall progress is meeting expectations. The company clarified in a statement that the development partner, Related Digital, has selected the “optimal equity partner” from multiple competitive proposals, and that partner is not Blue Owl Capital. However, the financing turbulence still highlights the funding pressures Oracle faces in its AI infrastructure strategy. Recently, the company has raised market concerns due to its large-scale expenditures and aggressive debt financing, causing its stock price to drop over 40% from its September peak and triggering a sell-off of its bonds.
The primary reason for Blue Owl’s withdrawal lies in shifting market sentiment. As AI spending rises and debt levels increase, lenders are pushing for stricter lease and debt terms, reducing the attractiveness of such deals. Oracle’s debt situation has become a focal point: as of the end of November, its net debt (including lease obligations) stood at approximately $105 billion, a significant increase from a year earlier. Analysts predict this figure could soar to $290 billion by 2028. Compared to competitors like Amazon and Microsoft, Oracle faces harsher lease terms, with lenders preferring to collaborate with experienced hyperscale enterprises.
Oracle’s stock price has experienced significant volatility this year: it surged to a record high earlier in the year, driven by the AI narrative. However, after the December earnings report, the company raised its capital expenditure expectations to $50 billion and indicated potential project delays until 2028, nearly wiping out its year-to-date gains and resulting in a cumulative decline of nearly 50% from its peak. Oracle is currently in discussions with multiple banks for a $38 billion debt financing package to address its funding gap, but the advancement of its AI infrastructure strategy continues to face significant challenges.
