Oracle's AI anxiety: It has built data centers worth hundreds of billions, but is afraid that OpenAI cannot pay the bills

To meet future computing power demands, Oracle has invested heavily in building data centers and secured large - scale clients such as OpenAI. However, as hundreds of billions of dollars in computing power investments gradually materialize, the market is starting to question: If clients are unable to continuously shoulder the high bills, will these massive AI infrastructures turn into a heavy burden?

In its annual financial report released last month, Oracle clearly stated that if major clients fail to pay their bills or choose not to renew their contracts, the company may be stuck with extremely expensive assets and find it difficult to re - lease or retrofit these computing power facilities under acceptable conditions.

This detailed risk disclosure has intensified Wall Street's concerns about the return on AI investment and triggered an immediate market reaction. Due to anxiety over escalating capital expenditures, the stock prices of relevant technology giants were sold off in June. Among them, Oracle's stock price tumbled 35% that month, the biggest decline in the industry.

Despite warning of potential negative consequences, Oracle maintains its aggressive investment stance. The company emphasizes that to expand cloud computing capabilities and seize the dividends of AI development, incurring huge capital and operating expenditures is an inevitable business choice.

Hidden Default Concerns Behind Massive Capital Expenditures

Oracle elaborated in its annual financial report on the various setbacks that its large - scale infrastructure investments to meet AI demands may face.

During the construction phase, due to supply chain disruptions, government restrictions on data center development, and third - parties failing to complete projects on schedule, the construction costs of data centers may exceed expectations or take longer.

After the facilities are built, the biggest hidden danger comes from the clients' ability to fulfill their contracts. Oracle warned in the document that some clients may be highly leveraged and face their own operational and regulatory risks. Even if the company's credit review and analysis mechanisms are functioning properly, Oracle may still face the risk of default or non - performance in transactions. Most large technology companies list data - center - related risks in their financial documents, but Oracle's detailed description of potential negative outcomes is quite rare.

The "Stargate" Contract with OpenAI

This warning comes against the backdrop of technology giants betting big on future computing power demands.

According to Bloomberg data, six companies, including Oracle, Microsoft, and Meta, have committed up to $850 billion for data center leases that have not yet started.

Among them, Oracle accounts for the largest share, mainly due to its $300 - billion "Stargate" contract with OpenAI.

To fulfill this contract, Oracle is developing large - scale data centers across the United States to provide cloud computing power. Bloomberg analysis points out that when Oracle mentions the risk of client default, the unnamed core target is precisely OpenAI. The success of this expansion plan highly depends on OpenAI's ability to continuously pay its bills for Oracle Cloud Infrastructure (OCI).

Wall Street's Anxiety about AI Investment Returns Intensifies

Oracle's potential concerns reflect investors' growing unease about the escalating expenditures in the technology industry.

In recent weeks, Wall Street's concerns about the ultimate return on investment from the AI boom have resurfaced. Data shows that the stock prices of the six technology companies with the largest lease commitments all declined in June, indicating that the market's tolerance for massive capital expenditures is decreasing.

However, for the technology industry, the risk of missing out on AI development opportunities is still far greater than the risk of over - spending. Oracle clearly stated in the document that to achieve the growth of its OCI business, the company must acquire more computing power, so incurring large amounts of capital and operating expenditures is an inevitable path.

This article is from the WeChat official account "Wall Street Insights". Author: Bu Shuqing. Republished by 36Kr with permission.