Foreign media report that Oracle’s large data center project, “Project Jupiter,” in New Mexico is showing signs of stress from the credit markets. The approximately $18 billion in loans tied to the project are recently trading at 89 to 91 cents on the dollar in the secondary market, indicating that investors are demanding a higher discount to take on this debt.
This does not mean that Oracle has defaulted. The article points out that a more direct interpretation is that the bank originally responsible for arranging financing failed to distribute the loan to institutional investors as expected, and the market is pricing in execution risk for the project.
Why did the loan drop to 89 cents?
Large project loans are typically originated by banks and then resold to institutional investors. According to Reuters, citing the Financial Times, institutions such as Santander and Jefferies participated in the financing of Project Jupiter, but due to weaker demand from buyers, banks have retained a larger-than-expected amount of Oracle-related debt.
The discount trading reflects that the project's progress has fallen short of expectations. The report notes that the project is at least seven months behind schedule, with delays caused by approval processes, inadequate power infrastructure, and local opposition. Meanwhile, an application related to gas supply for a 2.2-gigawatt gas turbine was also rejected.
For a data center project, delays directly increase financial pressure, as loan costs continue to accrue while the project cannot generate corresponding cash flow until it becomes operational.
Demand remains, with greater focus on cash recovery
The article argues that Oracle is not facing insufficient demand. Its remaining performance obligations have risen to approximately $66.4 billion, including over $3 billion in new AI cloud contracts. Oracle’s cloud infrastructure revenue previously increased by 121%, indicating that its AI cloud business continues to expand rapidly.
But the market is more concerned about how much additional capital Oracle needs to invest before these orders translate into actual revenue and cash. For capital-intensive AI infrastructure, order growth does not automatically alleviate prior funding pressures.
Downgraded ratings increase market scrutiny
In July this year, S&P downgraded Oracle's rating from BBB to BBB-, placing it at the lowest tier of investment grade. At the same time, Oracle continues to proceed with layoffs and cost-cutting measures while increasing capital investment in AI infrastructure.
The article argues that this signal does not indicate Oracle's AI strategy has failed, but rather reflects that lenders and bond investors are beginning to price risk more clearly. As financing for AI infrastructure continues to expand, the progress of similar projects, approval conditions, and supporting energy capabilities will increasingly directly impact financing costs.
Additional context: The report places this phenomenon within the broader wave of AI infrastructure financing, suggesting that markets are reassessing the debt risks associated with approximately $3.6 trillion in AI infrastructure expansion.