**[Oracle Cloud's AI Expansion Bets Trigger Credit Risks, Rating Nears "Junk"]** BlockBeats News, August 5, according to Reuters, Oracle Cloud is facing debt pressure and credit rating downgrade risks due to its large-scale bets on AI infrastructure construction, becoming the focal point of market concerns over the AI capital expenditure frenzy. The report states that Oracle Cloud has signed approximately $260 billion in data center lease commitments through the end of fiscal year 2026, with some leases set to commence next year. Due to limited cash reserves, the company has driven AI computing power expansion through massive borrowing and long-term leases, significantly increasing pressure on its balance sheet. Data shows that Oracle Cloud's current debt stands at approximately $129.5 billion, about 4.3 times its EBITDA over the past 12 months, far exceeding the less-than-1x levels of peers like Alphabet, Amazon, Microsoft, and Meta. S&P Global Ratings downgraded Oracle Cloud's credit rating to BBB- in July, just one notch above "junk" status. Moody's previously stated that Oracle Cloud's leverage ratio could rise significantly during the AI infrastructure construction phase, potentially nearing 5x in the short term. If the company's leverage ratio remains above 4.5x, S&P may further downgrade its rating. Oracle Cloud expects capital expenditures to reach up to $95 billion in fiscal year 2027, part of which will be covered by customers. The company stated that it will adhere to disciplined capital allocation and maintain an investment-grade credit rating. Market concerns are primarily focused on the mismatch between the duration of data center leases and AI demand. Oracle Cloud's data center leases typically span 15 to 19 years, while customer contract cycles may only last a few years. If future AI demand growth slows, the company could face significant fixed cost pressures. Additionally, Oracle Cloud's future revenue is highly dependent on AI customers. The company's remaining performance obligations (RPO) amount to $638 billion, nearly half of which are tied to contracts related to OpenAI. Analysts believe that sustained AI demand growth and customers' ability to fulfill contracts will be key to Oracle Cloud's ability to realize returns on its investments. Recently, Oracle Cloud's stock price has dropped about 50% since June, while the company's bond yields have risen to the 7%-8% range. Market credit risk indicators, such as CDS, have also climbed to an 18-year high. Investors are reassessing the balance between high-growth opportunities from AI infrastructure investments and the associated debt risks. [Original Link]