Five days after Oracle (ORCL) promised to curb its fundraising, the company raised its entire $20 billion in a single day.
Oracle launched a $10 billion bond sale on Monday and, at the same time, filed for a $10 billion stock sale. Together, that’s every dollar of new debt and equity it announced at last week’s investor day it would raise through fiscal 2030.
Investors didn’t like the speed. Oracle stock fell 9% to its lowest level since July, while Amazon (AMZN) and Alphabet (GOOGL) rose. That erased what was left of last week’s 11% investor day rally.
It’s been a difficult year. Oracle has lost more than half its value over the past 12 months, while Microsoft (MSFT), Amazon, Alphabet and Meta (META) aren’t too far from where they started.
So, is Oracle Big Tech’s canary in the coal mine? Not really.
The sharp declines recorded by the company do not constitute a warning sign for the rest of the group. After Oracle’s nine three-day drops of 12% or more since 2016, Microsoft, Amazon, Alphabet and Meta fell only four times in the following month, according to Yahoo Finance calculations. And at the height of the dotcom bubble in 2000 and the pandemic boom in 2021, Oracle peaked after the Nasdaq, not before.
What sets Oracle apart is how it funds AI development. Track the debt.
Oracle burned through about $24 billion in cash during its last fiscal year. As of August, it owed about $125 billion, nearly double its shareholders’ equity, or roughly what shareholders would have left after its debts were paid. Monday’s bonds add another $10 billion.
Lenders have noticed. It costs about five times more to insure Oracle’s debt against default than Microsoft’s, using credit default swaps — contracts that work like insurance, paying out if a company stops paying its debts.
Futurum CEO Daniel Newman called Microsoft “the AI adults in the room, the company that has really done this with the least collateral damage to its balance sheet” on Yahoo Finance last week.
Oracle also pays more to borrow. Its bonds maturing in 2066 yield about 8.4% — the annual yield a buyer gets at today’s price — compared to about 6.1% for Apple and Microsoft bonds maturing in 2062, according to a BofA note cited by The Market Ear. CoreWeave (CRWV), a highly leveraged AI cloud provider, is paying more than 14%.
Credit assessors are giving Oracle the benefit of the doubt for now.
Fitch maintained Oracle’s credit rating at BBB, two notches above junk, and said in a statement Monday that “following this capital increase, Fitch does not expect Oracle to raise significant additional capital over the rating horizon.” Moody’s also confirmed its rating but maintained its negative outlook, a sign that a downgrade is still possible.
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