Oracle’s AI Ambitions Face Scrutiny as Key Funding Deal Unravels

A major financing arrangement for Oracle's aggressive artificial intelligence infrastructure expansion has collapsed, sending the company's shares lower and raising questions about how it will fund its capital-intensive strategy. The withdrawal of investment firm Blue Owl Capital from a planned $10 billion deal to finance a massive data center project in Michigan has shifted investor focus squarely onto Oracle's balance sheet and cash flow sustainability.

Market uncertainty was triggered when Blue Owl Capital reportedly ended negotiations to provide approximately $10 billion in financing. These funds were earmarked for constructing a large-scale data center in Michigan, specifically designed to handle AI workloads for key customer OpenAI. Reports suggest Blue Owl's retreat was influenced by concerns over Oracle's rising debt levels and the ambitious scale of its planned investments.

The news catalyzed a significant sell-off. Oracle's stock price fell sharply, shedding roughly 10% of its value within a week. This decline places the shares approximately 46% below their 52-week high.

Oracle's management has contested this narrative, asserting that negotiations for the Michigan project are proceeding "as planned." The company stated that development partner Related Digital simply opted for a different equity provider from a competitive field. Despite this clarification, the damage to market sentiment appears evident, with selling pressure persisting.

Financial Metrics Under the Microscope

Blue Owl's exit has compelled investors to examine Oracle's financial health more closely. The core concern is whether the company is pushing a rapid AI infrastructure build-out at a time when its free cash flow is constrained.

This scrutiny comes despite Oracle recently posting strong operational results. Its latest quarterly earnings per share came in at $2.26, significantly surpassing analyst expectations of $1.64. However, underlying financial tensions are emerging:

• Substantial Negative Free Cash Flow: Heavy investment in data centers and hardware is estimated to have pushed free cash flow deeply negative, to over -$13 billion.
• Mounting Debt Load: A significant portion of the AI expansion is being funded through debt, amplifying worries about rising leverage ratios and heightened credit risk.
• Surging Capital Expenditure: Annual planned investments have increased by around $15 billion, primarily directed toward new data centers and the acquisition of GPUs.

The failed Blue Owl deal acts as a litmus test, indicating that private credit providers are now scrutinizing whether the pace of expansion aligns with prudent financial metrics.

Should investors sell immediately? Or is it worth buying Oracle?

Quarterly Performance and Market Sentiment

Adding to the context, Oracle's most recent quarterly figures, while showing robust growth in certain areas, did not fully meet all market expectations. For Q2 of fiscal year 2026, the company reported cloud revenue growth of 34%, with cloud services reaching $8 billion. However, total group revenue of $16.06 billion slightly missed forecasts of $16.19 billion.

The market is increasingly pricing in the execution risks associated with Oracle's transformation into an AI-centric infrastructure provider. Key details include:

• Market Reaction: Following the financing reports, the stock experienced a single-session decline of approximately 5.4%.
• Project Scale: The planned Michigan data center is intended to reach a capacity of 1 gigawatt, highlighting the capital intensity of the AI strategy.
• Valuation Context: Despite recent weakness, the stock is only moderately down year-to-date but trades notably below its key moving averages.

Analyst Perspective and Industry Implications

The turbulence at Oracle is being watched closely across the AI sector. Market experts suggest that financing obstacles for a heavyweight like Oracle could signal a cooling in the private credit market for infrastructure projects.

Several analyst firms are adjusting their financial models accordingly. While the long-term structural demand for AI computing power remains a positive, short-term risk premiums are rising. Price targets are being revised to reflect stricter assumptions regarding debt and cost of capital. The breakdown of talks with Blue Owl is viewed as concrete evidence that the phase of seemingly limitless financing during the AI boom may be encountering limits.

Outlook: A Critical Test of Financial Strategy

Technically, Oracle's shares are in a weak phase. Trading roughly 22% below its 50-day moving average and nearly 19% under its 200-day average, the market is signaling clear pessimism. Meanwhile, the 14-day RSI reading of 69.3 has moved near overbought territory following a downward trend—an indicator of a nervous, trend-driven market phase.

Fundamentally, Oracle now faces a clear test. The company must swiftly demonstrate that it can secure alternative financing partners for the Michigan project and that existing AI contracts, such as the one with OpenAI, can be fulfilled without further deterioration of its credit profile. The crucial challenge for management in coming quarters will be to convincingly balance rapid investment, growing cloud business, and controlled leverage.