Oracle is about to collapse? Banks stop lending, stock price halved, Sunday refinancing of 50 billion to "stay alive"

```

Oracle is currently caught in a liquidity crisis. On Sunday, it announced plans to raise $45–50 billion this year to expand its AI data centers. Previously, several investment banks had warned that it could run out of cash as early as the end of 2026. Meanwhile, its share price has halved from its peak in September last year, and the price of its credit default swaps (CDS) has surged to the highest level since the 2008 financial crisis.

This fundraising is seen by the market as a matter of life or death for Oracle. Oracle plans to raise half the funds through mandatory convertible preferred stock and a market issuance program of up to $20 billion. The remaining funds are expected to be raised through a one-time bond issuance in early 2026.

Several US banks have already begun to withdraw financing support for Oracle-related projects. According to Bloomberg, TD Cowen’s channel survey shows that due to concerns over Oracle's financing ability, several US banks have stopped providing loans for its data center projects.

Banks still willing to provide financing have raised rates to non-investment grade levels, from SOFR+225-250 bps last September to SOFR+300-450 bps now.

The funding needs for Oracle’s AI data center construction are far outpacing its cash inflow; the company’s free cash flow has already turned negative and is expected to remain so until 2030.

According to TD Cowen, to support its existing agreement with OpenAI, Oracle needs to purchase about 3 million GPUs and other IT equipment. With a conservative estimate of $30 million per MW of IT configuration cost, this implies about $156 billion in capital expenditure needs.

Furthermore, OpenAI itself is not yet profitable and has about $1.4 trillion in multiyear commitments to other companies, further escalating market concerns over the sustainability of this deal.

Emergency Financing Plan

In its Sunday statement, Oracle said the fundraising is to build additional capacity to meet the contract demands of its largest cloud customers, including AMD, Meta Platforms, Nvidia, OpenAI, TikTok, and xAI.

The company plans to raise about half the funds through mandatory convertible preferred stock and up to $20 billion of at-the-market stock issuance, with the rest to be raised via a one-time bond issue in early 2026.

This is Oracle’s second large-scale fundraising after its $18 billion bond issue in 2025, which was among the largest corporate bond issues of that year.

But the market is not optimistic about this round of fundraising. Luria pointed out that, given Oracle’s existing commitments and the trading level of its CDS, the bond market cannot absorb investment-grade debt at this scale. Equity issuance could also further depress the company’s share price, which would in turn impact its bonds.

Wall Street Issues Stern Warning

Morgan Stanley and TD Cowen analysts released reports in late January, raising serious concerns about Oracle’s financial position.

Morgan Stanley sharply cut its target price for Oracle, stating that “GPU as a Service (GPUaaS) is a significant revenue opportunity, but combined in-depth research by our equity, credit, and GVAT teams shows that infrastructure buildout will make per-share earnings fall short of the target and force a large increase in financing needs.”

According to Bloomberg, TD Cowen’s Michael Elias noted in his January 26 report that Oracle is considering laying off 20,000 to 30,000 employees and selling some assets in response to US banks pulling financing support for its AI data center expansion. The layoffs could free up $8-10 billion in cash flow.

Greyhound Research chief analyst Sanchit Vir Gogia said the $300 billion OpenAI deal may look impressive, but “when you examine it closely, it’s built on backlog orders, without guaranteed revenue, but with massive capital expenditure requirements.”

Shrinking Financing Channels

Oracle’s financing dilemma stems from its aggressive data center expansion plan. According to TD Cowen’s channel survey, by the end of Q3 2025, Oracle had leased about 5.2GW of data center capacity in the US to support OpenAI workloads.

Within two months, private operators raised about $58 billion in debt for Oracle/OpenAI data center projects. But as equity and bond investors increasingly doubt Oracle’s financing ability, as shown by spikes in CDS spreads and slumps in share and bond prices, several US banks started withdrawing loans from Oracle-related data center projects.

TD Cowen’s channel survey shows multiple Oracle data center leasing projects under negotiation with private operators have fallen apart due to lack of financing, making Oracle unable to secure capacity by leasing.

Facing surging capital needs, TD’s latest channel survey reveals Oracle is now asking clients for a 40% upfront deposit to ease incremental capital expenditure needed for revenue growth (RPO). In addition, Oracle is evaluating various paths to ease funding pressure, including layoffs, asset sales, vendor financing, and a “Bring Your Own Chip” (BYOC) model.

Cash Flow Black Hole & OpenAI Risk

The core issue Oracle faces is the cash flow mismatch caused by its deal structure. It cannot collect cash from customers in sync with AI data center construction, which has already turned free cash flow negative, a situation expected to persist until 2030. The company must cover tens of billions in spending in the coming years, mainly for semiconductor purchasing and leasing.

The contract with OpenAI is a key piece of Oracle’s cloud investment strategy. OpenAI has committed to pay about $300 billion to lease servers from Oracle, but OpenAI itself is not yet profitable, heightening concerns over when, or if, huge capital outlays will generate meaningful returns.

Gogia believes companies must fundamentally rethink how to assess Oracle’s cloud contracts. “Oracle’s cloud buildout should be seen as a shared infrastructure risk—rather than a service agreement.”

DA Davidson’s Luria says: “If Oracle can successfully raise funds, it will begin saving itself from the huge dilemma it now faces.” But even if the fundraising works, the company still faces a significant funding shortfall; if it fails, it could mean the end of the road.

Risk Warning and DisclaimerThe market presents risks—invest with caution. This article does not constitute personal investment advice nor considers the specific investment objectives, financial situations, or needs of any particular user. Users should consider whether any opinions, views, or conclusions contained herein are suitable to their specific circumstances. Investments made accordingly are at your own risk. ```