Oracle’s AI buildout faces a funding test as Tencent deal spotlights demand
Published on 10/01/2026 at 21:45 | Editorial boerse-global.de
Oracle’s race to add AI computing capacity is producing two very different signals at once: a huge new customer commitment and a financing burden that is becoming harder to ignore. A reported five-year agreement with Tencent would give the Chinese tech group access to around 100,000 advanced AI chips through Oracle data centers in Southeast Asia, a reminder that demand for the company’s cloud infrastructure remains strong even as the cost of expanding it keeps climbing.
According to the Financial Times, the contract is worth about US$7 billion and includes an advance payment of nearly one-third of the total. Reuters said it could not verify the report initially, and neither Oracle nor Tencent has confirmed the arrangement.
The deal also highlights why offshore cloud setups matter for Chinese companies. US export restrictions make direct purchases of top-end chips into China difficult, so leasing computing power abroad has become an important workaround. Under that model, the hardware stays inside Oracle’s data centers rather than being shipped to the customer.
The numbers behind Oracle’s expansion remain striking. In the first quarter of fiscal 2027, cloud infrastructure revenue jumped 121 percent to US$7.4 billion. At the same time, the company’s remaining performance obligations hit a record US$664 billion, underscoring how much contracted business is already in the pipeline.
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That backlog comes with a steep price tag. Free cash flow sank to minus US$5.40 billion in the latest quarter as capital spending climbed to nearly US$28.5 billion. For the full fiscal year, Oracle is targeting investments of between US$90 billion and US$95 billion.
To help fund that scale of spending, management plans to raise about US$40 billion in fresh debt and equity. Morgan Stanley still rates the stock “Equal Weight,” citing the tension between rapid growth and heavy capital demands.
Investors are also watching the physical side of Oracle’s infrastructure push. In New Mexico, the company is building “Project Jupiter” with partners, a campus expected to reach 2.45 gigawatts of capacity. The site was hit by recent flooding, but Oracle said no critical infrastructure was damaged and that the schedule remains unchanged.
The broader construction picture is more complicated. In one report, the New Mexico campus was described as a US$165 billion project, and Oracle recently invoked force majeure against the developer to protect itself from potential costs tied to missed deadlines. The company is also contending with delays at “Project Lighthouse” in Wisconsin, where permitting disputes and high-voltage grid connections are slowing the buildout.
Those pressures are showing up in the credit market as well. A bank loan of US$18 billion for Project Jupiter was recently trading at around 90 cents on the dollar, a sign of skepticism about how smoothly the project will progress.
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The stock has already absorbed some of the strain. Oracle shares were quoted at EUR 122.52, up 1.1 percent on the day, while another market update put the move at 2.0 percent to EUR 123.70. Even so, the shares are still down 26 percent since the start of the year.
For now, the Tencent agreement demonstrates that Oracle’s cloud capacity is in demand. The harder question is whether the company can keep financing, building and powering its megaprojects quickly enough to turn that demand into durable returns.
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