Oracle's AI-Driven Capital Spending and Debt Load: A Growing Risk for Long-Term Value?

In the race to dominate the artificial intelligence (AI) landscape, Oracle has emerged as a bold but controversial player. , , according to reports. While this strategy has positioned Oracle as a key infrastructure provider for AI innovation, it has also triggered investor concerns about the sustainability of its debt-fueled expansion. ?

The Debt-Fueled AI Bet

Oracle's capital spending has been financed through a series of massive bond issuances, , one of the largest in the tech industry. Analysts project . This debt load has raised alarms among credit rating agencies. S&P Global forecasts Oracle's debt-to-EBITDA ratio will exceed 4x by 2027–2028, a level that could jeopardize its investment-grade rating. Meanwhile, , a red flag for investors accustomed to the company's historically strong cash generation.

The risks are compounded by Oracle's heavy reliance on OpenAI, a partnership that now drives 60% of its RPO backlog. While OpenAI's long-term potential is undeniable, its current unprofitability and dependence on external funding create a precarious dynamic. As one analyst notes, "Oracle is betting the farm on a single customer" that hasn't yet proven it can monetize its AI ambitions. , for the next two years.

Financial Metrics and Industry Comparisons

Oracle's debt metrics starkly contrast with those of its peers. Microsoft maintains a debt-to-equity ratio , . , . . In fiscal 2025, , . , .

ROI Projections and Market Skepticism

Goldman Sachs forecasts , . However, this optimism is tempered by declining gross margins, over the same period. . Moreover, , , according to analysis.

Deutsche Bank remains bullish, , . . , , , . As one critic puts it, , .

Conclusion: A High-Stakes Gamble

Oracle's AI strategy is a double-edged sword. On one hand, , . On the other, . , .

For investors, . , . , .