Moody's raises Big Red flag over Oracle's AI datacenter buildout blueprint
(2025/09/22)
- Reference: 1758551413
- News link: https://www.theregister.co.uk/2025/09/22/moodys_raises_questions_over_oracles/
- Source link:
Ratings agency Moody's has pointed to the dangers inherent in [1]Oracle's $300 billion agreement with OpenAI - one of the deals contributing to a staggering $455 billion pipeline of obligations for Big Red's cloud infrastructure.
News of the demand for racks from AI model builders [2]spiked Oracle's share price by 27 percent earlier this month, despite Big Red's muted figures for revenue and profit in its latest quarterly financials.
Moody's said late last week that the OpenAI "contract size is staggering — highlighting the tremendous potential for Oracle's AI Infrastructure. However, the related risks of the build are significant."
[3]
It pointed to the significant "counterparty risk" in Oracle's projected growth - the possibility that another party fails to meet its obligations.
[4]
[5]
"Counterparty risk is always a key consideration in any type of project financing, particularly where there is a high reliance on revenue from a single counterparty," Moody's analysts wrote on Wednesday.
As The Register pointed out at the time of Oracle's results — and [6]others have [7]said since — OpenAI doesn't yet have the money it has promised to Big Red. It [8]might be on track to raise $40 billion this year, for example.
[9]
In July, Moody's noted Oracle's current debt obligations were also a risk to the AI infrastructure plans, which require significant capital expenditure. At the time it revised Oracle's outlook to negative, although the current risk rating remained unchanged.
[10]'Infuriated', 'disappointed' ... Ex-VMware customers explain why they migrated to Nutanix
[11]AWS says AI could disrupt everything – and hopes it will do just that to Windows
[12]NIST finalizes trio of post-quantum encryption standards
[13]Microsoft places huge cap-ex bets on datacenters for cloud and AI
“The scale and speed of the entry into the standalone AI infrastructure business is unprecedented in Oracle's history and introduces a new business model very different from the core software business," said Moody's analyst Jones further. He added: "though ratings are not affected at this early stage, the speed of the change, and potential scale of investment particularly as the AI industry is still evolving, introduce an overhang to the ratings."
On an earnings call following Oracle's Q1 2026 results, CEO Safra Catz said the company had signed significant cloud contracts with “the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD, and many others”.
This meant the company's remaining performance obligations — contracts signed but not yet paid for — were more than $455 billion, an increase of 359 percent from last year and up $317 billion from the end of Q4. ®
Get our [14]Tech Resources
[1] https://www.theregister.com/2025/09/11/openai_reportedly_on_the_hook/
[2] https://www.theregister.com/2025/09/10/oracle_q1_results/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aNFyk_BCKIK3zPZ6F9b8GAAAANU&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aNFyk_BCKIK3zPZ6F9b8GAAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aNFyk_BCKIK3zPZ6F9b8GAAAANU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://www.wsj.com/tech/ai/openais-funding-challenges-loom-over-oracle-broadcom-deal-spree-be353399
[7] https://www.cnbc.com/2025/09/14/an-ai-house-of-cards-worries-of-a-bubble-grow-after-oracles-rally-on-open-ai-deal.html
[8] https://finance.yahoo.com/news/openai-latest-funding-round-popular-155044503.html
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aNFyk_BCKIK3zPZ6F9b8GAAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[10] https://www.theregister.com/2025/05/08/vmware_migrations_why_nutanix/
[11] https://www.theregister.com/2024/12/04/amazon_leans_into_ai/
[12] https://www.theregister.com/2024/08/14/nist_postquantum_standards/
[13] https://www.theregister.com/2023/07/28/microsoft_places_huge_capex_bets/
[14] https://whitepapers.theregister.com/
News of the demand for racks from AI model builders [2]spiked Oracle's share price by 27 percent earlier this month, despite Big Red's muted figures for revenue and profit in its latest quarterly financials.
Moody's said late last week that the OpenAI "contract size is staggering — highlighting the tremendous potential for Oracle's AI Infrastructure. However, the related risks of the build are significant."
[3]
It pointed to the significant "counterparty risk" in Oracle's projected growth - the possibility that another party fails to meet its obligations.
[4]
[5]
"Counterparty risk is always a key consideration in any type of project financing, particularly where there is a high reliance on revenue from a single counterparty," Moody's analysts wrote on Wednesday.
As The Register pointed out at the time of Oracle's results — and [6]others have [7]said since — OpenAI doesn't yet have the money it has promised to Big Red. It [8]might be on track to raise $40 billion this year, for example.
[9]
In July, Moody's noted Oracle's current debt obligations were also a risk to the AI infrastructure plans, which require significant capital expenditure. At the time it revised Oracle's outlook to negative, although the current risk rating remained unchanged.
[10]'Infuriated', 'disappointed' ... Ex-VMware customers explain why they migrated to Nutanix
[11]AWS says AI could disrupt everything – and hopes it will do just that to Windows
[12]NIST finalizes trio of post-quantum encryption standards
[13]Microsoft places huge cap-ex bets on datacenters for cloud and AI
“The scale and speed of the entry into the standalone AI infrastructure business is unprecedented in Oracle's history and introduces a new business model very different from the core software business," said Moody's analyst Jones further. He added: "though ratings are not affected at this early stage, the speed of the change, and potential scale of investment particularly as the AI industry is still evolving, introduce an overhang to the ratings."
On an earnings call following Oracle's Q1 2026 results, CEO Safra Catz said the company had signed significant cloud contracts with “the who's who of AI, including OpenAI, xAI, Meta, NVIDIA, AMD, and many others”.
This meant the company's remaining performance obligations — contracts signed but not yet paid for — were more than $455 billion, an increase of 359 percent from last year and up $317 billion from the end of Q4. ®
Get our [14]Tech Resources
[1] https://www.theregister.com/2025/09/11/openai_reportedly_on_the_hook/
[2] https://www.theregister.com/2025/09/10/oracle_q1_results/
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aNFyk_BCKIK3zPZ6F9b8GAAAANU&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aNFyk_BCKIK3zPZ6F9b8GAAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aNFyk_BCKIK3zPZ6F9b8GAAAANU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[6] https://www.wsj.com/tech/ai/openais-funding-challenges-loom-over-oracle-broadcom-deal-spree-be353399
[7] https://www.cnbc.com/2025/09/14/an-ai-house-of-cards-worries-of-a-bubble-grow-after-oracles-rally-on-open-ai-deal.html
[8] https://finance.yahoo.com/news/openai-latest-funding-round-popular-155044503.html
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aNFyk_BCKIK3zPZ6F9b8GAAAANU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[10] https://www.theregister.com/2025/05/08/vmware_migrations_why_nutanix/
[11] https://www.theregister.com/2024/12/04/amazon_leans_into_ai/
[12] https://www.theregister.com/2024/08/14/nist_postquantum_standards/
[13] https://www.theregister.com/2023/07/28/microsoft_places_huge_capex_bets/
[14] https://whitepapers.theregister.com/
I happened to be watching Bloomberg TV the day that deal was announced, or maybe the day after, anyway I've rarely seen the Bloomberg talking heads as nonplussed - as they pointed out, the energy requirement of the deal, if implemented in full, would be equivalent to two Hoover Dams, which they did not seem entirely convinced would even be feasible. If the AI industry is *not* in a bubble, then I guess we're in for some crazy times.