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Oracle is already underwater on its 'astonishing' $300bn OpenAI deal

AI's circular economy may have a reverse Midas at the centre
[https]The OpenAI and Oracle-backed Stargate AI data centre in
Abilene, Texas (c) Bloomberg

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Bryce Elder

PublishedNovember 18 2025

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It's too soon to be talking about the Curse of OpenAI, but we're
going to anyway.

Since September 10, when Oracle announced a $300bn deal with the
chatbot maker, its stock has shed $315bn* in market value:

 

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browser settings.

[https]

OK, yes, it's a gross simplification to just look at market cap. But
equivalents to Oracle shares are little changed over the same period
(Nasdaq Composite, Microsoft, Dow Jones US Software Index), so the
$60bn loss figure is not entirely wrong. Oracle's "astonishing
quarter" really has cost it nearly as much as one General Motors, or
two Kraft Heinz.

Investor unease stems from Big Red betting a debt-financed data farm
on OpenAI, as MainFT reported last week. We've nothing much to add to
that report other than the below charts showing how much Oracle has,
in effect, become OpenAI's US public market proxy:

 

Some content could not load. Check your internet connection or
browser settings.

[https]

The theory goes that OpenAI is in a rush to [S:define:S] discover
AGI, and Oracle is uniquely able to scale the compute capacity it
needs. Oracle promises the lowest upfront costs and fastest path to
income generation among the hyperscalers because it's a data centre
tenant rather than the landlord.

Alternatively, Oracle doesn't have as much operating profit to burn
as its competitors, so is throwing everything it can at supporting
its one big customer in exchange for an IOU:

 

Some content could not load. Check your internet connection or
browser settings.

[https]

At an analyst day last month in Las Vegas, Oracle said it was aiming
for cloud computing revenue of $166bn by 2030:

[https](c) Oracle company presentation

To get there, Oracle's capex budget for the current financial year
ending May is $35bn. The consensus has annual capex levelling out at
around $80bn a year in 2029, after which revenues continue to ramp:

 

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browser settings.

[https]

And from 2027, the majority of revenue would be coming from OpenAI:

 

Some content could not load. Check your internet connection or
browser settings.

[https]

But Oracle's net debt is already at 2.5 times ebitda, having more
than doubled since 2021, and it's expected to nearly double again by
2030. Cash flow is forecast to remain negative for five straight
years:

 

Some content could not load. Check your internet connection or
browser settings.

[https]

So while the OpenAI agreement has been more than written off the
equity, the risk of unfunded expansion remains and the cost of
hedging Oracle debt is at a three-year high.

 

Some content could not load. Check your internet connection or
browser settings.

[https]

We need to add the usual warnings: Credit-default-swap liquidity
isn't great; the increased demand for Oracle CDS comes after $18bn of
bond sales in September; a CDS premium in the low 100 basis points
isn't that exciting; and some firms taking the other side of the
trade are no mugs. Still, pointy.

Beyond the charts, a broader question relates to whether an OpenAI
deal is still worth announcing.

A few months ago, any kind of agreement with OpenAI could make a
share price go up. OpenAI did very nicely out of its power to reflect
glory, most notably in October when it took AMD warrants as part of a
chip deal that bumped share price by 24 per cent.

But Oracle is not the only laggard. Broadcom and Amazon are both down
following OpenAI deal news, while Nvidia's barely changed since its
investment agreement in September. Without a share price lift, what's
the point? A combined trillion dollars of AI capex might look like
commitment, but investment fashions are fickle.

* Calculation and graph updated at 11am GMT for shares outstanding,
and text tweaked at 2pm GMT to reflect a less clickbait headline

Further reading:
-- Oracle's astonishing jam-tomorrow OpenAI trade (FTAV)

Copyright The Financial Times Limited 2025. All rights reserved.
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