Oracle and OpenAI’s ambitious $500 billion Stargate project is encountering significant challenges in the debt markets as lenders grow increasingly cautious about exposure to the massive AI infrastructure initiative. The project, announced in early 2025, aims to build 10 gigawatts of data center capacity by 2029 — equivalent to New York City’s peak electrical consumption — to power OpenAI’s artificial intelligence operations.
JPMorgan Chase recently led a syndication that extended approximately $38 billion in debt financing for two Stargate data center campuses in Texas and Wisconsin. However, sources indicate that the bank has faced diminishing interest as it attempts to sell portions of the loan to other financial institutions and investors. While the projects remain fully financed and the syndication is considered successful overall, the slowdown signals growing market concerns.
The hesitation stems primarily from Oracle’s credit rating, which sits at BBB — below AI competitors like Microsoft and Google. In September 2025, S&P Global Ratings affirmed this rating but warned of a potential downgrade due to Oracle’s enormous AI infrastructure spending. A drop below BBB minus would classify Oracle’s debt as junk, significantly raising borrowing costs.
Credit default swaps insuring against Oracle debt losses rose in November, reflecting market anxiety about the company’s AI spending spree. Analysts note that Oracle has essentially become “a proxy for OpenAI’s ability to raise significant amounts of capital,” creating what DA Davidson analyst Gil Luria calls “a very precarious position.”
The financing structure involves multiple syndication deals across various locations. Bank of America is leading financing for a Michigan campus, while another lender group provided $18 billion for a New Mexico facility. In total, OpenAI announced six Stargate sites with roughly 7 gigawatts of planned capacity in October 2025.
The core challenge is that OpenAI’s current revenue represents only a fraction of the tens of billions annually needed to justify the infrastructure costs. However, reports suggest OpenAI is attempting to raise up to $100 billion in new funding, which could provide an equity cushion and make the debt more attractive to investors. Market participants question whether there’s sufficient “digestive capacity” for the unprecedented scale of borrowing required.
Key Quotes
We are hearing from market participants that in some cases, there may be banks that could be approaching the exposure levels they’re comfortable with when it comes to certain data center projects
Dhaval Shah, a director at S&P Global Infrastructure Ratings, explained the growing caution among lenders. This statement underscores how the concentration of AI infrastructure projects among a few players is testing the limits of financial institutions’ risk appetite.
Oracle has become a proxy for OpenAI’s ability to raise significant amounts of capital. It’s a very precarious position.
Gil Luria, an analyst at DA Davidson, highlighted the fundamental risk in the Stargate structure. This observation captures how Oracle’s financial health has become intertwined with OpenAI’s uncertain revenue prospects, creating systemic risk.
I am very surprised these loans were even underwritten at the time. The market has indicated this is not investment-grade debt.
Luria’s assessment of the initial loan arrangements reveals how market sentiment has shifted dramatically. His comment suggests that the original financing terms may have been too optimistic given Oracle’s credit profile and the project’s risks.
Do we have enough digestive capacity in the market for investors to buy all of the debt that will be required. That’s the market’s real concern: the size of this whole movement.
David Tawil, a partner at Castle Harbour, articulated the fundamental question facing AI infrastructure financing. His concern about market capacity highlights whether the financial system can support the unprecedented scale of AI-related borrowing.
Our Take
The Stargate financing challenges represent a potential inflection point for the AI industry’s infrastructure buildout. While enthusiasm for AI remains high, this story demonstrates that capital markets are beginning to impose discipline on even the most prominent players. The fact that Oracle — a tech giant with decades of operating history — is facing credit concerns due to AI spending illustrates how transformative and risky this technology transition has become.
The dependency structure is particularly concerning: Oracle’s creditworthiness now hinges on OpenAI’s ability to generate revenue that doesn’t yet exist at scale. This creates a house of cards effect where multiple parties’ financial health is interdependent. If OpenAI’s $100 billion fundraising succeeds, it could validate the entire model. If not, we may see the first major retrenchment in AI infrastructure spending, with ripple effects across the technology sector and financial markets.
Why This Matters
This story reveals critical vulnerabilities in the AI infrastructure boom that has dominated tech investment over the past two years. The financing difficulties facing Stargate — despite backing from industry giants Oracle and OpenAI — suggest that even the most ambitious AI projects face real capital constraints.
The situation highlights a fundamental tension in the AI industry: massive infrastructure investments are required before revenue models are proven. OpenAI’s relatively modest revenue compared to its infrastructure needs exemplifies this challenge, raising questions about the sustainability of current AI spending levels across the industry.
For the broader market, Oracle’s credit rating concerns and rising borrowing costs could signal a turning point in AI financing. If lenders become more selective, it may slow the breakneck pace of data center construction and AI development, potentially reshaping competitive dynamics in the sector. The outcome of Stargate’s financing challenges will likely influence how future mega-projects approach funding and whether the AI infrastructure buildout can maintain its current trajectory.
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