Doubts about the “AI bubble” resurface! Oracle offers “force majeure,” and $18 billion loan tortures “Stargate” delivery prospects

Zhitong Finance App learned that the AI computing infrastructure expansion layout of database software and AI cloud computing supergiant Oracle (ORCL.US) is facing a test of transmission from energy supply and AI cloud computing facility engineering delivery to contract liability and credit market pricing. Project Jupiter's energy support has been blocked, causing the market to pay more attention to how potential delivery delays affect contract payment arrangements and cash flow fulfillment, credit market debt payments, and further deepening market concerns about the financing risks of Oracle and related projects.

Oracle is taking steps to avoid the continuous accumulation of expenses due to a large data center under construction in New Mexico, adding another variable to this project, which is already plagued by waves of opposition and regulatory setbacks.

According to recent media reports, people familiar with the matter said that the tech giant has issued a notice to the project developer, a company under Blue Owl Capital Inc. (Blue Owl Capital Inc.), citing force majeure. These sources said that Oracle is not trying to withdraw from its status as the main tenant of the project, but rather wants to defer payments when this data center project called Project Jupiter is blocked and cannot be put into operation as planned in 2028. These people requested anonymity because they were discussing non-public matters.

After the news broke, Oracle's stock price fell 4% before the US stock market on Thursday, September 24, and fell directly by more than 5% after the opening of the US stock market. The company still stated that the project is progressing according to the established schedule and reaffirms its commitment to invest in New Mexico; the information currently disclosed indicates advance arrangements for potential extension costs, and it is not yet possible to determine that Oracle will withdraw from the project or that it has been exempted from payment.

“Stargate” hits a delivery hurdle: Oracle secures payment space for potential delays

The engineering constraints behind this dispute are very specific: Project Jupiter is designed to use 2.45 gigawatts of electricity and is planned to be powered by Bloom Energy's natural gas fuel cells. Therefore, whether the gas pipeline can be implemented is directly related to whether the power generation system, computer room commissioning, and computing power delivery can be linked. The New Mexico Land Authority has previously once again rejected the relevant pipeline route application, involving disputes over greenhouse gas emissions, water resources, and local public benefits; the operation of the supporting pipeline has been postponed until February 1, 2027. From the perspective of data center engineering economics, there is also a gap between being able to sign a computing power order and being able to deliver billable computing power capacity on schedule, fuel supply reliability, environmental permits, and complete system acceptance. Delays in any key step may widen the gap between early AI infrastructure construction expenses and subsequent revenue fulfillment.

The financing structure of the project makes this time difference more sensitive: Stack Infrastructure, a subsidiary of Blue Owl Capital, is responsible for development, Blue Owl provides equity capital, and about 20 banks provide $18 billion in project loans. As the main lessee, Oracle undertakes the park's capacity and serves downstream computing power requirements, including OpenAI. If Oracle successfully delays payment, the time for developers to receive cash may be delayed accordingly, but construction expenses and financing obligations may not be suspended simultaneously.

The relevant analysis by Kunying Law Firm emphasizes that force majeure relief depends on specific contract terms, performance leniency in one contract, and does not automatically cover other financing or power supply contracts. As deduced from this, the payment buffer sought by Oracle may turn into a funding gap that project shareholders and lenders need to re-evaluate.

When issues beyond their control arise, businesses often invoke force majeure to relieve themselves of contractual obligations. In this incident, Oracle wanted to protect its contractual rights when construction progress was delayed. However, it is currently uncertain whether this move will exempt Oracle from its previously agreed financial obligations.

“Project Jupiter is still progressing according to our established schedule,” an Oracle spokesperson said, but did not comment on the notice. “Our commitment to New Mexico is unwavering, and we are confident that the future will move forward.”

A representative of Blue Owl Capital, which owns data center developer Stack Infrastructure, declined to comment.

This large-scale project, located in southern New Mexico, is an important part of the “Stargate” AI infrastructure construction plan. US President Donald Trump announced this plan with senior management at Oracle, OpenAI, and SoftBank Group; it was the most high-profile project in a series of investment promises in the US that were heavily promoted at the beginning of his second term. At the time, Trump called it a “huge investment,” the scale of which was “truly unprecedented.”

Nearly two years later, the 2.45 gigawatt park — equivalent to the electricity needed to power some 1.8 million homes at any point in time — experienced serious setbacks, including the denial of a license application critical to its energy supply plan. As resistance to the broader AI data center construction boom continues to intensify, the project is becoming an iconic case. It also became the focus of political controversy before the US midterm elections, which may turn related elections into a referendum surrounding this wave of construction.

Even if this force majeure notice is only a precautionary measure to gain some room for maneuver, it may unsettle the lenders supporting the project. A person familiar with the matter said that the debt associated with the development of the project is already at the level of a pressured transaction, and the price is less than 90 cents per dollar.

A syndicate of about 20 banks provided a $18 billion loan to finance the construction of the data center park. This is one of several huge debt deals to fund the AI infrastructure boom.

The notice may also once again raise questions about the stability of data center leasing contracts in the market. Such contracts usually include a clause that allows the customer to withdraw if the service fails to start as scheduled. For example, earlier this year, Google, a subsidiary of Alphabet, agreed to pay Elon Musk's SpaceX to buy computing power until mid-2029, but reserves the right to terminate the contract if it fails to obtain the computing power service by a specified date.

Force majeure clauses are relatively common in the energy and commodities sector when events such as bad weather and geopolitical conflicts disrupt supply and cause companies to be unable to fulfill contracts. According to a client tip recently issued by Kunying Law Firm, these terms are also becoming increasingly common in data center development projects.

“In AI data center projects, force majeure is no longer a standard clause at the end of the contract,” the notice issued in June said. “It is a core litigation and risk allocation tool that can determine whether a delay is limited to a local area or has a knock-on impact along the construction, customer, electricity, insurance, and financing documents of a project.”

OpenAI signed a $400 billion agreement with Oracle and SoftBank last year to support the development of five US data centers, including this project in New Mexico. Stack Infrastructure, a portfolio company under Blue Owl Capital, is responsible for developing the facility, and Blue Owl Capital itself has promised equity funding.

A key gas pipeline project developed by Energy Transfer LP was originally scheduled to be put into operation this month to supply fuel for Project Jupiter, but the project was delayed for nearly six months until February 1, 2027 due to the New Mexico Land Authority's repeated refusal to approve its proposed pipeline path. According to the design, Project Jupiter will be powered by Bloom Energy's natural gas fuel cells.

Oracle, on the other hand, has launched a PR campaign in New Mexico to deal with opposition. Whether the company can win support from those who are skeptical about the project remains unclear.

According to documents previously reviewed by Bloomberg, before the full details of Project Jupiter were announced, the developers had already collaborated with local officials on incentive plans and strategies to gradually disclose information to the public. Local residents didn't learn that the project was related to Oracle and OpenAI until it was approved.

Orders are large, and cash flow is more critical: high concentration and high leverage due to excessive reliance on OpenAI orders continue to be tested by the market

The market's differences with Oracle focus on how fast and how high return on capital can be converted into cash flow for huge AI orders. For the first quarter of fiscal year 2027 ending August 31, 2026, Oracle Cloud infrastructure business revenue reached $7.4 billion, up 121% year over year, and remaining performance obligations (RPO) reached $664 billion; however, the company expects that approximately 13% of this will be recognized as revenue over the next 12 months. This means that huge forward contracts require continuous construction and service delivery before they can be gradually fulfilled.

OpenAI is an important customer for its AI expansion, so investors also need to evaluate OpenAI's commercial revenue, financing capacity, and future computing power procurement pace. However, this kind of customer focus is constantly being compounded by Oracle's own capital investment intensity. In the latest quarter, the company's capital expenditure reached US$28.499 billion, operating cash flow exceeded US$23.103 billion, and free cash flow was negative US$5.396 billion; operating cash flow also included approximately US$11.4 billion in advance payments from customers with significant financing components. These prepayments provided financial support for expansion while also accommodating services that will still have to be delivered in the future.

As of the end of the quarter, the balance sheet balance of loans totaled approximately $125.337 billion, an amount that does not yet include all lease obligations. Therefore, if the project is delayed, it may further lengthen the cycle of “first investing in construction capital and then recovering cash through delivery”, making liquidity management and financing costs an important variable affecting shareholder returns.

Credit markets have increased their vigilance over these issues. Reuters revealed on August 4 that Oracle's 5-year credit default swap (CDS) spread had previously risen to 215 basis points, the highest level in 18 years; S&P downgraded its rating to BBB- in July, which is the lowest level of investment. The 215 basis points here are current data and are not instant quotes from September 24. Meanwhile, the Jupiter project loan offer disclosed on September 18 has dropped to about 89-91 cents per dollar face value. The company's CDS reflects the price of Oracle's credit risk purchase protection, and the project loan discount reflects investors' valuation of specific development financing. Together, the two show that the market is increasing the demand for uncertain repayment.

Derived from an investment strategy perspective, the core test Oracle faces is to match customer needs, energy availability, project delivery, contract payments, and debt repayment in time. If the delay causes revenue to shift and construction and financing expenses continue to occur, the return on project capital may decline even if forward orders do not disappear; if credit spreads widen further, additional financing may also require higher risk premiums. In an analysis on September 16, Apollo chief economist Torsten Slok also linked the expansion of hyperscale cloud vendor CDS to the expansion of debt financing, pressure on free cash flow, and uncertainty about AI investment recovery. Therefore, questions surrounding Oracle's “AI bubble” most needed to be answered with on-time delivery, continuous repayment, and improved leverage; Project Jupiter just made these problems originally hidden in long-term growth forecasts become observable engineering and contract nodes.