Perhaps the rabbit is being pulled from the top hat. Or it’s hungry. Three recent announcements are giving Oracle shareholders–of which founder Larry Ellison is a 40% holder–some confidence in a volatile market. While ORCL shares are slightly down year-to-date, in the past month since their massive layoff, Mr. Market has boosted them up close to 36% at time of writing, most of the runup in the past week. (Editor’s note: this analysis is meant to be directional and qualitative. It is detached from ‘stock picking’. For your Editor, the interest is in the future of Oracle Health, which is likely collateral damage from All This.)
Oracle is taking on $16 billion debt, this time largely funded by bond fund PIMCO. This funded a single data center campus in Saline Township, Michigan. Total financing announced in late April was $16.3 billion, anchored by PIMCO’s financing $10 billion of the bond tranche plus $2 billion in equity from Related Digital Infrastructure and Blackstone. It’s reported that this is the largest single-facility technology debt package ever assembled. PIMCO (Pacific Investment Management Company LLC) is a bond fund, the largest of its type (active fixed-income), and a subsidiary of Allianz Global Investors. It stepped in because US banks refused for the reasons bulleted below.
What gives pause is the total debt picture that Oracle is taking on to develop data centers for clients–OpenAI primarily, but also Meta.
- $72 billion in total debt to finance the Stargate joint venture in Michigan, Texas, Wisconsin, and New Mexico. Other reports have indicated over $100 billion [TTA 10 Mar].
- The PIMCO debt is structured as a 7.5% coupon with a 19.5-year maturity, with six years of interest-only payments followed by 13 years of amortization
- Oracle’s long-term debt load has risen nearly 66% since the start of 2025. Yahoo Finance
- This is despite a BBB-negative credit outlook from S&P Global Ratings and Moody’s Baa2 Negative outlook (link), a major factor in why banks shied away from further financing.
- $553 billion in performance obligations with OpenAI
TNW discusses in a deeper dive the debt structure and why PIMCO could make this bet where banks could not. The question it raises is whether the furious pace of data center building is another cycle of overbuilding–and if it is, will it be absorbed in time? The ominous parallels: the 2000s building boom in an earlier iteration of data centers, the fiberoptic boom of the early 2000s that broke WorldCom, Global Crossing, Winstar, Corning, and 360Networks, cloud overbuilding that left Amazon Web Services with years of excess capacity (it helps to have a deep-pocketed and not all that transparent parent), and others. This Editor would also liken it to the early years of 1980s-90s airline deregulation (too many airlines, too much debt, too many seats) and about a decade in the cruise ship industry where too many cabins were chasing too few people. These took decades and multiple bankruptcies to settle.
The Project Jupiter New Mexico Stargate data center is turning into an experiment to reduce the environmental/power impact of AI data centers. The alternative energy source for the Doña Ana County data center will come from fuel cells developed by Bloom Energy. The fuel cells have up to 2.45 GW of installed capacity and will replace the usual gas turbines and diesel generators, consolidating power into one single microgrid. How big this ‘microgrid’ will be is not disclosed. The data center campus is being built by a development company, BorderPlex Digital Assets, which is promoting this site as a “Tier 1 industrial engine for New Mexico”.
Fuel cells generate electricity without combustion through electrochemically combining hydrogen and oxygen, producing water, heat, and electricity. Versus conventional power sources, they reduce nitrogen oxides emissions by approximately 92% and use a “negligible” amount of water. However, the overall picture is not quite that rosy. Other reports indicated that overall greenhouse gases emitted by the data center even with the fuel cell microgrid are estimated at 10 million tons per year, representing ~30% savings over a conventionally powered 14 million tons per year, the latter more than the cities of Las Cruces and Albuquerque. While preliminary construction is taking place, Project Jupiter is still awaiting approval from the New Mexico Environment Department and faces several lawsuits from environmental activists. SourceNM, Oracle release
A Federal contract to expand the Department of War’s AI capabilities across their classified cloud network. No value attached, and details are naturally on the QT and strictly Hush-Hush, but Oracle’s May Day announcement says in about three ways that the agreement is for advancing AI capabilities as part of the DOW’s AI Acceleration Strategy by “enabling new capabilities across its three core tenets: warfighting, intelligence, and enterprise operations”. (Whew!) From the release: “This agreement accelerates the transformation toward making the United States military an AI-first fighting force and strengthens warfighters’ ability to maintain decision superiority across all domains of warfare.” Oracle release
Also Yahoo Finance
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