What You Should Know
- The Report: Investment bank TD Cowen claims Oracle is evaluating “multiple paths” to finance its massive AI datacenter build-out, including cutting 20,000 to 30,000 jobs and potentially selling its health tech unit, Cerner, the Register reports.
- The Cause: The financial pressure stems from Oracle’s $300B contract with OpenAI, which requires an estimated $156B in capital spending for GPUs and infrastructure—a burden that has spooked U.S. debt investors.
- The Indicators: Risk metrics are flashing red. Oracle’s credit default swap (CDS) spreads have tripled, and the company is reportedly now requiring 40% upfront deposits from some customers to secure cash flow.
The $156 Billion Bill
The root of the problem is the sheer scale of the infrastructure required. TD Cowen estimates that fulfilling the OpenAI contract alone will require $156 billion in capital spending to procure around 3 million GPUs and related IT equipment.
When added to commitments for Meta and Nvidia, Oracle’s total build-out obligation swells to over $500 billion.
This has spooked the markets. U.S. banks have reportedly pulled back from lending on Oracle-linked datacenter projects, and the cost of insuring Oracle’s debt (via credit default swaps) has tripled in recent months—a classic signal that Wall Street perceives increased risk of default or liquidity stress.
The “Cerner Sale” Option
The most shocking revelation in the report is the potential divestiture of Cerner.
Oracle bought the electronic health record (EHR) giant in June 2022 to pivot the company toward healthcare data. Selling it now would be a stunning reversal, effectively admitting that the healthcare strategy must be sacrificed to feed the AI beast.
However, the math might necessitate it. Cutting 30,000 jobs would free up $8 billion to $10 billion in annual cash flow. Selling Cerner would inject a massive lump sum of liquidity, allowing Oracle to service its debt without tapping the increasingly skeptical bond market.
Tightening the Screws on Customers
The liquidity crunch is already impacting operations. The bank reports that Oracle has started requiring 40% upfront deposits from customers (excluding large AI clients like OpenAI). This aggressive move to pull cash forward suggests that the company is prioritizing immediate liquidity over flexible sales terms.
