Oracle's AI Datacenter Gamble: Job Cuts and Asset Sales on the Table to Fund $300B OpenAI Deal

Oracle's ambitious AI datacenter expansion faces a critical financial crossroads, with investment bank TD Cowen reporting that the tech giant may need to slash up to 30,000 jobs and sell its Cerner health unit to fund its massive build-out plans.

The Scale of Oracle's AI Bet

The numbers involved are staggering. Oracle has committed to a $300 billion, five-year contract with OpenAI, with the bank estimating that this single deal alone will require $156 billion in capital spending. To put this in perspective, that's more than the GDP of many countries.

Last year's $15 billion increase in Oracle's 2026 capital expenditure forecasts to $50 billion already spooked investors. This year, concerns have intensified as both equity and debt investors question Oracle's ability to finance such an enormous build-out.

Financial Markets Sound the Alarm

Credit default swap (CDS) spreads for Oracle tripled in the final months of last year, indicating a perceived increase in risk. These financial instruments, which offer insurance against debt default, are now significantly more expensive for Oracle, suggesting that the market views the company's financial position as increasingly precarious.

Oracle's September bond issuance of $18 billion and additional borrowing have not fully assuaged investor concerns. Some estimates suggest the company will need to borrow $25 billion annually to finance its AI datacenter ambitions.

The Build-Out Challenge

TD Cowen estimates that the OpenAI build-out alone would require around 3 million GPUs and other IT equipment. This massive infrastructure project is part of Oracle's total $523 billion commitment across multiple AI customers, including Meta and Nvidia.

Compounding the challenge, US banks have reportedly pulled back from Oracle-linked datacenter project lending. Private operators leasing to Oracle are also struggling to secure financing, which impedes the leasing option in Oracle's build-out plan.

Potential Solutions on the Table

According to TD Cowen's research note, Oracle is "evaluating multiple paths forward to address financing questions." The most drastic options include:

• Headcount reduction: Between 20,000 and 30,000 job cuts, potentially freeing up $8 billion to $10 billion in cash flow
• Asset sales: Including the potential sale of Cerner, the health tech unit Oracle acquired for $28.3 billion in June 2022
• Vendor financing: Exploring alternative financing arrangements

Customer Impact

Interestingly, Oracle is now requiring 40 percent upfront deposits from customers in datacenter contracts, though large AI customers appear to be exempt from this requirement. This suggests Oracle is trying to preserve cash flow while maintaining its most valuable AI relationships.

The Asian Exception

While US banks have raised concerns about Oracle's risk profile, TD Cowen notes that banks in Asia appear more relaxed about the company's financial position. However, the skepticism from US financial institutions casts significant doubt over Oracle's ability to support its mammoth building program.

Industry Context

Oracle's situation reflects the broader challenges facing tech companies making massive AI infrastructure investments. The company's predicament highlights the tension between ambitious AI expansion plans and the practical realities of financing such enormous capital expenditures.

As one industry analyst noted, "The scale of Oracle's AI datacenter build-out is unprecedented. Even for a company of Oracle's size and financial strength, $300 billion over five years represents a massive bet that's testing the limits of traditional financing models."

What's Next

Oracle has declined to comment on the TD Cowen report, leaving the market to speculate about which, if any, of these drastic measures the company might pursue. The coming months will be critical in determining whether Oracle can secure the financing needed to execute its AI datacenter vision or whether it will need to significantly scale back its ambitions.

For now, the tech industry watches closely as one of its largest players grapples with the financial realities of the AI revolution it helped create.

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