The Indicator from Planet Money - Why Oracle's debt load could be your problem

Episode Date: October 19, 2026

Oracle, the multinational tech giant has taken on a lot of loans to build up its AI capacity. But Oracle’s investors are not happy with this piling debt load. We explain why Oracle is such a pivotal player — and potentially weak link — in the AI-fueled economy.Fact checking by Sierra Juarez.Your Next Listen –How the bond market is handling AI risk? –Over 2,000 episodes in our archive on the NPR AppConnect with The Indicator from Planet Money–The Indicator newsletter — a weekly roundup of news, ideas and staff picks. –Instagram, TikTok and YouTube –Find the Planet Money book –Find the Planet Money game, Sell Me A Sasquatch, and other merch at the NPR Shop!Support public media by subscribing to NPR+ and enjoy perks for over 25 podcasts like this one. This show’s perks include sponsor-free listening. Learn more at plus.npr.org. See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

NPR. Oracle is not like the other children in the big tech company classroom. Sure, the software giant is investing in artificial intelligence, and the company's revenue is booming. But Oracle has irked the credit market by loading up on loans to make its data center dreams come true. See, Oracle may be the weak link in a criss-crossing daisy chain of businesses that's holding up the AI boom. My biggest concern in all of this is the circular deals. oracles are part of circular deals with open AI, but they have one with meta. If you look at Vigias all over the place in these circular deals, Microsofts, and a few.

This is the indicator for Planet Money. I'm Ricky Mulvey. And I'm Adrian Ma. Oracle is a pivotal player in the artificial intelligence story. And whether you're invested in the company or not, its fortunes could affect you. We'll tell you why after the break. Oracle is one of those companies that you've probably heard of, but may not deal with directly. It's a multinational tech giant that sells enterprise software and computing power. Yeah, Oracle's software involves the less glamorous programs that run businesses,

the databases that keep track of inventory, health records, and supply chains. The vast majority of big companies use its databases and software. And investors really like Oracle's software business. It's steady. It makes a nice profit. And about a decade ago, credit analysts viewed Oracle bonds as a safe investment. They were a high margin software company. Now their capital-intensive data center build-out. This was a huge shift in business strategy. Matt Sheridan is a senior lecturer in the finance department at the Ohio State University.

I took Matt's investing class as a student. He was one of my favorite professors, and this was an excuse to call him. Matt analyzed credit before working as a professor, too. The biggest issue with Oracle is their debt load is nearly doubled in the last two years. They're sitting at $169 billion in total debt. They're the fifth largest investment grade issuer now. I think they're the second largest that's non-financial when the Amazon has more. Oracle went into the AI boom in a weaker financial spot than other tech giants. The company burned a lot of cash when it bought a health records company a few years ago. Larry Ellison is the

co-founder, executive chairman at Oracle. He thinks that training AI models is a huge business opportunity. Here's what he said at a company keynote last year. It's the largest, fastest growing business in human history. Bigger than the railroads, bigger than the Industrial Revolution. I mean, it is a whole new world that is dawning. So why aren't Oracle investors happy? Well, even aside from Larry Ellison's dreams, there's his son David's dreams too. The senior Ellison guaranteed 40 billion. billion dollars to support his son's Paramount Skydance merger deal with Warner Brothers Discovery. And that made investors nervous.

But back to the data centers. One reason is the sheer size of the debt. It's turned Oracle from a business that generates cash into one that burns money. And another is that the path back to profitability may take some time. Building data centers takes a second. And the third reason is that long path may not be certain. Oracle is relying on OpenAI a lot. Alpment and the folks at OpenAI promised Oracle they would pay about $300 billion over the next five or so years.

Oracle's data centers help power ChatGPT. Right, so you can ask ChatGPT how to make like a weekend salmon recipe. And OpenAI's financials come with a lot of open questions, mostly because you probably can't see them. The company delayed going public and its books are not open. And Matt says if Open AI's financials were out in the open, its value would be. also be based on its actual numbers, not just the story it tells investors. So if you can't really trust that OpenAI's revenues are going to be growing at parabolic speed, that trickles into Oracle, there is some concentration risk there.

Oracle and OpenAI are not just in a customer-seller relationship. This bit has more implications for the wider economy. OpenAI pays Oracle to use its cloud infrastructure and says it'll pay a lot bought more in the coming years. So, Oracle buys chips from Nvidia to build this cloud even more. And then Nvidia invests money into OpenAI so that OpenAI can buy a computing space from Oracle, which, remember, is buying those Nvidia chips. I'm just picturing a circle. And according to credit investors, Oracle is a weak link in this circular economy. Oracle has already signaled that it may run into trouble paying back its

loans on time. The company is currently building this massive data center in New Mexico for Open AI to use. Oracle told its creditor that it may need to delay its loan repayments on this data center using something called a force majeure notice. And this is when a borrower tells its lender, hey, something totally unexpected happened. We can't make our delivery or payment. It's actually common in kind of the commodity space where you have forward contracts to deliver, say, oil. And if there's geopolitical risk, like we've currently seen, with the straight of Hormuz. I mean, that's outside of your control.

It's less common, though, in corporate America. Oracle issued the notice because of potential delays, but publicly maintains that the project remains on schedule. Now, this notice created some alarming headlines, but Matt says it actually could benefit Oracle. It allows the company to delay payments, though it's still on the hook for the full amount. Still, Oracle's credited investors are pricing in more risk.

And this is showing up in something called a credit default swap, or CDS. You might remember these from the Great Recession. Think of this like an insurance policy that Wall Street people trade back and forth. If the company goes bankrupt, the CDS contract will pay you out. But you can also use it to speculate. You can use it to profit on the demise of a company. The rates on these swaps are rising. This means that Oracle is becoming riskier.

Matt says this does not mean the company is on the edge of bankruptcy or another immediate credit downgrade, though. It does mean the credit market believes that Oracle is growing increasingly risky. Right. S&P, the big credit rating agency, they downgraded Oracle's credit in July. S&P basically said, we'd like to see you make a profit again. Now Oracle is barely above junk status, or a status that would force a lot of investors to run away from Oracle bonds. Lindsay Tyler is a credit research analyst at Morgan Stanley. She says to imagine data centers is a luxury apartment complex.

Demand is strong now, but it may not be forever. The analogy might be you have 10 apartments, you've pre-signed leases for those 10 apartments, and you're thinking, should I build another floor? Right now, with S&P rating Oracle just one notch above junk bond status, falling beneath investment grade would have serious consequences. I think it's a medium-term risk, but in that instance, Oracle would have a materially a more challenging time, not only funding the build-out, but also refinancing. If Oracle goes to junk status, then many investors in the AI boom couldn't invest in one of its key players.

For example, many pension funds can't invest in junk-rated bonds. Matt says these circular deals and heavy amounts of debt could lead to real problems for the economy as a whole. And that makes me concerned that this, if this is a bubble, it's going to be more like a Lehman Brothers type event. In retrospect, it's easy to do. to say they were too interconnected to fail because it almost took down the global financial system. Is open AI systemically important? Well, if they get in trouble and then that ripples through to Oracle and that ripples through to Nvidia and then the whole ecosystem starts to collapse, that would be a serious problem. And they're all becoming very interconnected.

For now, the wheel is still turning. This episode was produced by Julia Ritchie and Corey Bridges. It was engineered by Cina LaFredo and fact-checked by Sierra Juarez. Kate Cicannon is our show's editor, and the indicator is production NPR. Do people say junk bond anymore? I think we'll ensure it's high yield, leverage credit, include loans in there.