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Oracle’s AI cloud growth is accelerating at an extraordinary pace.
So is the financing pressure behind it.
On September 18, Reuters reported that about $18 billion of loans tied to Oracle’s Project Jupiter data center in New Mexico had come under pressure.
The loans were quoted at roughly 89 to 91 cents on the dollar by syndicate banks including Santander and Jefferies, according to a Financial Times report cited by Reuters.
The problem is not weak demand.
Oracle’s latest quarter showed the opposite.
Cloud infrastructure revenue rose 121% year over year to $7.4 billion.
Total quarterly revenue rose 30% to $19.3 billion.
Remaining performance obligations reached $664 billion.
The problem is the enormous amount of capital required to turn that demand into physical data center capacity.
Project Jupiter is becoming a case study in how the AI infrastructure boom can create financial risk even when customer demand is strong.
What Is Project Jupiter?
Project Jupiter is a massive AI data center campus planned in Doña Ana County, New Mexico.
The site covers roughly 1,400 acres.
It is part of Oracle’s broader infrastructure relationship with OpenAI.
The project secured roughly $18 billion in loans from a banking consortium to begin construction.
The original plan included about 2.2 gigawatts of gas turbines to power the campus.
That gives a sense of scale.
A large AI data center can consume as much power as a major industrial complex.
Why the Loans Are Trading Below Par
Loans trading at 89 to 91 cents on the dollar indicate investors now demand a discount to take the debt.
Several concerns are driving that pressure.
Local opposition has focused on water use and air quality.
The New Mexico State Land Office blocked a request for a natural-gas pipeline that was expected to support the site’s power system.
Banks have also had difficulty selling the loans to a broader group of investors.
At the same time, Oracle’s total debt burden has grown as it spends heavily on AI infrastructure.
The combination makes the project debt less attractive.
Oracle’s Credit Rating Is Part of the Problem
Oracle’s corporate credit rating now sits only one notch above junk after an S&P downgrade in July.
That does not mean the company is in financial distress.
Oracle remains highly profitable and generates substantial operating cash flow.
But the rating matters because the company is simultaneously funding one of the largest AI infrastructure expansions in the world.
Higher borrowing costs make every new project more expensive.
And when a specific project encounters permitting or power problems, lenders become more sensitive to the risk.
The Demand Side Is Extremely Strong
Oracle reported Q1 fiscal 2027 revenue of $19.3 billion, up 30%.
Cloud revenue reached $11.6 billion, up 62%.
Infrastructure cloud revenue rose 121% to $7.4 billion.
Remaining performance obligations increased to $664 billion.
Oracle said it booked more than $30 billion of additional AI cloud contracts during the quarter.
It also delivered more than 300,000 GPUs to AI cloud customers since the end of Q4.
Those numbers show why the company is spending so aggressively.
Customers want the capacity.
Oracle does not have enough capacity to serve all of the demand today.
But Cash Flow Shows the Cost
Oracle generated a record $23 billion of operating cash flow in Q1.
Yet free cash flow was negative $5 billion because the company continued investing heavily in cloud infrastructure.
During fiscal 2026, Oracle raised $43 billion in debt and $5 billion in equity.
In Q1 fiscal 2027, the company completed a $20 billion at-the-market stock sale as part of its capital-investment program.
This is the central Oracle investment debate.
The income statement is getting stronger.
The balance sheet and funding requirements are getting more complicated.
Why Project Jupiter Matters to the OpenAI Relationship
OpenAI is one of the biggest drivers of AI infrastructure demand.
Project Jupiter is part of the physical capacity needed to support that relationship.
If the New Mexico project is delayed, Oracle may need to move workloads elsewhere, change the power plan or spend more money to meet customer obligations.
A delay does not automatically mean Oracle loses the contract.
But it can raise costs and postpone revenue recognition.
That makes execution risk financially important.
Why the Power Problem Is Becoming an AI Industry Problem
Project Jupiter is not only an Oracle story.
AI data centers need extraordinary amounts of electricity.
Power generation, grid connections, gas pipelines, transformers and permits are becoming bottlenecks.
The constraint is increasingly physical.
The AI industry can have enough customer demand and enough GPUs but still struggle to find power and build facilities quickly enough.
What the Bull Case Looks Like
Oracle’s bull case remains powerful.
AI demand continues to exceed supply.
Cloud infrastructure revenue is growing more than 100%.
Backlog is enormous.
Many large contracts include customer prepayments or customer-supplied GPUs, reducing Oracle’s funding burden.
If Project Jupiter’s permitting issues are resolved and capacity comes online on schedule, current financing stress could look temporary.
What the Bear Case Looks Like
The risk is that multiple projects encounter delays.
Borrowing costs remain high.
Free cash flow stays negative.
Oracle must continue raising debt and equity.
The credit rating weakens further.
In that scenario, strong cloud growth may not translate into equally strong per-share returns.
That is why investors are paying so much attention to the financing structure.
Why the Cost of Capital Changes the Oracle Thesis
Oracle can still create substantial shareholder value from AI even with high capital spending, but the return threshold has changed.
When long-term interest rates are near 5%, projects need to produce higher returns than they did when money was cheaper.
Investors will increasingly compare cloud growth with interest expense, depreciation and free-cash-flow conversion rather than rewarding backlog alone.
The debate is shifting from “How large is the backlog?” to “How much value remains after the infrastructure is financed?”
What to Watch Next
Watch the price of Project Jupiter debt.
Watch permitting developments in New Mexico.
Watch changes to the power plan.
Watch Oracle’s capital expenditure.
Watch free cash flow.
Watch credit ratings.
Watch additional equity or debt financing.
And watch how quickly Oracle converts its $664 billion RPO into actual revenue.
The central question is:
Can Oracle convert extraordinary AI demand into cash flow faster than the cost and complexity of building the required infrastructure increase?
Project Jupiter is now one of the clearest tests.