Five days after Oracle (ORCL) promised to rein in its fundraising, it raised the full $20 billion in a single day.
Oracle kicked off a $10 billion bond sale Monday and, at the same time, filed to sell $10 billion of stock. Together, that’s every dollar of new debt and stock it said at last week’s investor day it would raise through fiscal 2030.
Investors didn’t love the speed. Oracle stock fell nearly 9% Monday, its worst day since June, to its lowest close since July 29. That wiped out what was left of last week’s 11% investor-day pop. Over three sessions, Oracle is down nearly 18%, its worst three-day stretch since 2002, by Yahoo Finance’s calculations.
It’s been a rough year. Oracle has lost more than half its value over the past 12 months, while Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), and Meta (META) are all within about 5% of where they started.
So is Oracle Big Tech’s canary in the coal mine? Not really.
The company’s big drops haven’t been an early warning for the rest of the group. After Oracle’s nine previous three-day plunges of 12% or more since 2016, Microsoft, Amazon, Alphabet, and Meta fell over the following month only four times, by Yahoo Finance’s calculations. And at the tops of the dot-com bubble in 2000 and the pandemic boom in 2021, Oracle peaked after the Nasdaq, not before.
What sets Oracle apart is how it pays for the AI build-out. Follow the debt.
Oracle burned through about $24 billion in cash in its last fiscal year. It owed about $125 billion as of August, nearly twice its shareholders’ equity, roughly what would be left for shareholders after its debts were paid. Monday’s bonds add $10 billion more.
Lenders have noticed. It costs about five times as much to insure Oracle’s debt against default as 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’s really done this with the least collateral damage to their balance sheet” on Yahoo Finance last week.
Oracle also pays more to borrow. Its bonds due 2066 yield about 8.4% — the yearly return a buyer locks in at today’s price — compared with about 6.1% for Apple’s and Microsoft’s bonds due 2062, according to a BofA note cited by The Market Ear. CoreWeave (CRWV), a debt-heavy AI cloud provider, pays more than 14%.
The credit raters are giving Oracle the benefit of the doubt, for now.
Fitch kept Oracle’s BBB credit rating, two notches above junk, and said in a statement Monday that “following this capital raise, Fitch does not expect Oracle to raise material incremental capital over the rating horizon.” Moody’s affirmed its rating too but kept its outlook at negative, a sign a downgrade is still possible.
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