Shares of Oracle rise as $50 billion raise eases data center financing fears

Shares of Oracle rose 2.5% on Monday after Wall Street analysts said the software company’s $50 billion fundraising plan eases concerns about its ability to finance a massive data center expansion with OpenAI.Long a smaller player in the cloud market, Oracle has emerged as a major player in computing power rentals in the past year, thanks to its $300 billion deal with OpenAI.

But investors have grown concerned about how it would finance the data center expansion needed to serve OpenAI and other customers including Elon Musk’s xAI and Meta. Shares fell more than 15% last year as December results showed cash burn of about $10 billion for the first half of the fiscal year.The company said Sunday it expects to raise between $45 billion and $50 billion by 2026 through a combination of stock sales and debt, arguing the move reflected its commitment to maintaining an investment-grade rating amid the AI ​​spending.

As much as $20 billion of that is expected to come from selling its shares at market price, with the remainder financed by bond sales in early 2026. The company said it does not expect to issue more debt this year.

“Oracle is not only saying they are committed to investment-grade debt, but they are also sending a clear message to bond investors and the rating agencies that they are,” Guggenheim analysts said.

Oracle announced Monday that it has filed for an offering of 100 million depositary receipts. “We can see how debt markets are likely to be calmer following this transaction as the combination of additional equity and the mandatory convertible notes will reduce debt needs and strengthen Oracle’s balance sheet,” Barclays analysts said in a note.

Investors sold Oracle’s credit-default swaps, which offer bondholders protection against default. According to Markit Data, both the 10-year CDS and 5-year CDS fell by about 35 basis points each.

DOUBTS REMAIN ABOUT AI

Still, investors remain cautious about whether the hundreds of billions of tech companies spending on AI infrastructure will pay off, given the limited evidence of productivity gains in the real world.

Strong reception to Google’s latest AI model and a deal for the company’s technology to power Apple’s AI features have also put pressure on OpenAI in the high-stakes race.

“The perception is that Oracle’s fortunes are now strongly tied to OpenAI and combined with the company’s plans to raise up to $50 billion to invest by 2026, it seems unlikely that nervousness about the situation will dissipate any time soon,” said Russ Mould, investment director at AJ Bell.

Oracle has faced heightened criticism following a lawsuit against bondholders in January and last year’s spike in the cost of credit default swaps.

Jefferies analysts said the financing plan “buys time” for Oracle’s AI ambitions, but warned it could weigh on margins in the near term, saying free cash flow is unlikely to turn positive until FY29.