In September, Oracle 1.72% announced what looked like the coup of the decade: a massive $300 billion partnership to provide cloud infrastructure to OpenAI. On paper, it was a triumph—a guaranteed revenue stream of roughly $60 billion annually for five years.
But instead of popping champagne, the market panicked.
The “Negative” Valuation
Since the deal was announced, Oracle’s stock has crashed, wiping out approximately $315 billion in market capitalization. Financial analysts, including those at the Financial Times, have crunched the numbers and reached a stunning conclusion: the market has effectively valued this $300 billion deal at negative $74 billion
How does a record-breaking contract turn into a liability?
1. The Debt Trap
To fulfill this contract, Oracle isn’t just flipping a switch; it is building massive “Stargate” class data centers. This requires tens of billions in upfront capital expenditure (CapEx), funded largely by debt. Investors are terrified that Oracle is leveraging its entire future balance sheet to build servers for a single client.
2. The “All-In” Risk
Oracle has effectively become a “proxy stock” for OpenAI. If OpenAI thrives, Oracle gets paid. But if the AI bubble bursts—or if OpenAI fails to generate the trillions in revenue needed to pay these bills—Oracle is left holding the bag with massive debt and empty data centers.
3. The “Winner’s Curse”
While competitors like Microsoft 1.34% and Amazon 1.75% have diversified AI bets, Oracle’s singular, massive bet has spooked Wall Street. The sentiment is clear: investors fear Oracle has won a contract it cannot afford to fulfill.
The Bottom Line
This deal serves as a grim reality check for the AI boom. It’s no longer just about who can sign the biggest partnership; it’s about who can actually pay for the infrastructure without breaking the bank. For now, Oracle is paying a steep price for its ambition.