Oracle's latest $50bn AI bet rattles investors

Investors worry about share dilution, Oracle's debts and low returns

Oracle’s announcement that it plans to raise up to $50 billion this year to meet demand for AI infrastructure caused its shares to drop, with investors jittery about the company’s debt and the long-term prospects for AI.

Oracle said on Sunday that it plans to raise between $45 billion and $50 billion by selling bonds in a “one-time issuance”, and that it expects to issue convertible securities and at-the-market (ATM) equities during 2026.

“This funding plan reflects Oracle’s commitment to maintaining an investment-grade rating, prudent capital allocation, balance-sheet strength and transparency with investors as the company continues to expand its Oracle Cloud Infrastructure business,” the company said in a statement.

However, investors are concerned about share dilution, Oracle’s debts and low shareholder returns on its AI gamble. Last September, Oracle raised $18 billion through a bond issue to fund its massive AI datacentre building programme. The company is facing a bondholder lawsuit alleging the company failed to disclose the level of debt needed to finance its AI ambitions.

There are fears that Oracle’s finances are too closely bound to the success of other players in the AI space, including OpenAI (with which it signed a $300 billion deal last year) and Nvidia, and that it has become an unwitting bellwether for the entire unpredictable AI sector.

Analysts estimate that 58% of Oracle's future order backlog is tied solely to OpenAI, calculating that Oracle will need to borrow about $100 billion over four years to build the infrastructure OpenAI needs. In total, the company is thought to have contracted up to $455 billion in cloud services that have not yet been delivered.

“We’re entering the end-game for AI exposed stocks, it’s do or die and what we’re seeing is many firms, like Oracle and Microsoft go all-in on the technology,” Michael Field, chief equity strategist at Morningstar, told CNBC.

Oracle’s announcement comes after a separate report from investment bank JD Cowan suggested that the company could cut as many as 30,000 jobs and sell off major assets in its pivot to AI.

It is also a time in which the AI infrastructure spending wave is coming under scrutiny. Microsoft’s shares dropped last week, largely on fears on the scale of its investment into datacentres.

Oracle’s stock dropped 3% in early pre-trading on Monday.