S&P Global Downgrades Oracle to BBB-: AI Investments and OpenAI Dependency Spark Concerns Rating agency S&P Global has downgraded Oracle’s credit rating from BBB to BBB-, placing the technology company just one notch above the junk bond threshold. The downgrade, announced on July 9, reflects concerns over Oracle’s growing debt and capital demands driven by its rapid expansion into artificial intelligence (AI) infrastructure. While S&P maintains a stable outlook for Oracle, the move signals increasing risk for the company’s financial health. The downgrade is attributed to Oracle’s massive investments in AI data centers, which have significantly strained its financial position. S&P forecasts a free operating cash flow deficit of nearly 42 billion U.S. dollars for the 2027 fiscal year. To bridge this gap, the agency expects Oracle to rely on a combination of debt and equity financing. The company has already raised its spending forecast for 2027 to 90–95 billion U.S. dollars, far exceeding S&P’s earlier projection of 60 billion. Analysts believe rising costs for components like GPUs and network equipment are contributing to this financial pressure. A critical factor in the downgrade is Oracle’s heavy reliance on OpenAI as a major client. S&P estimates that approximately half of the 638 billion U.S. dollars in contracted but undelivered services is tied to OpenAI. The agency classifies OpenAI as a “central credit risk,” warning that any failure by OpenAI to meet its payment obligations could leave Oracle with long-term data center rental agreements. These contracts, according to S&P, are difficult to terminate or transfer to other customers without significant financial loss.#oracle #openai #ai_data_centers #bank_for_international_settlements #s_p_global
SpaceX lands investment-grade credit ratings as shares tumble from record high SpaceX has received investment-grade credit ratings from all three major rating agencies just days after its record-breaking stock market debut, despite its newly listed shares experiencing a sharp decline on Thursday. The aerospace and AI company, led by Elon Musk, secured its first-time ratings from Moody's, Fitch, and S&P Global, marking a significant milestone that positions its debt in investment-grade territory. This could enable the company to access cheaper financing as it funds a massive expansion plan. The ratings were announced less than a week after SpaceX's historic initial public offering (IPO), which raised approximately $85.7 billion (€73.8 billion), setting a new record for the largest IPO in history. Moody's assigned SpaceX a Baa1 long-term issuer rating with a stable outlook, citing the company's "exceptional franchise strength" as the world's leading orbital launch provider and operator of Starlink, the largest low Earth orbit satellite broadband network. The agency noted that Starlink has become SpaceX's primary cash flow generator, supporting improved scale, wider margins, and a gradual shift away from more cyclical launch revenue. Moody's also highlighted risks, including the heavy execution and financial demands of SpaceX's large-scale AI buildout. The agency warned of high capital intensity, sustained negative free cash flow, and an uncertain range of returns. It emphasized the company's reliance on the next-generation Starship V3 vehicle, cautioning that technical setbacks or delays could pressure long-term growth. Additionally, the agency pointed to elevated governance risks tied to SpaceX's controlled structure and concentrated voting power, which limit independent board oversight and make the firm heavily dependent on Elon Musk.#spacex #elon_musk #moody_s #fitch #s_p_global
