Oracle spent its $20 billion funding cap in five days, then lost Tencent and Microsoft

First the lease died. On November 4, Oracle▲+5.84% — Oracle, up 5.84 percent today, the enterprise software company turned AI landlord, scrapped a five-year, $7 billion deal that would have rented about 100,000 advanced AI chips to Tencent, the Chinese internet group, in Southeast Asian data centers after US officials raised concerns↗, the Financial Times reported ¹. Thirty percent of that value was due upfront, and whether the money comes back is unclear ¹.

Two days later, Bloomberg reported Microsoft▼−2.43% — Microsoft, down 2.43 percent today declined to renew a 2023 deal renting Oracle capacity for AI-powered Bing and has been switching the servers off↗, older Nvidia▼−5.72% — Nvidia, down 5.72 percent today chips that no longer fit its specifications ²³. Oracle shares touched a 52-week low of $109.21 on November 6 ²³.

The four-year funding allowance lasted five days

On October 28, Oracle told investors↗ it would raise no more than $20 billion in the capital markets through fiscal 2030, split between $10 billion of equity and $10 billion of debt, and that vendor financing, customer-provided hardware and customer prepayments would carry the rest of the build ⁴.

On November 2 it priced 86.2 million shares at $116↗, an 11.2% discount, plus $10 billion of senior notes; both closed on November 4 ⁵. Chief financial officer Hilary Maxson had called the money "the final amount needed to fund the remainder of this cycle↗" ⁶. The allowance is spent, and the two contracts that left this week were the kind backed by customer cash: the Tencent lease had 30% paid upfront, and Microsoft was a renter ¹².

The bill now lands on customers

In the quarter ended August 31, Oracle took in $19.3 billion of revenue, up 30%, and spent $28.5 billion building, leaving free cash flow at negative $5 billion ⁴⁷. The new bonds priced 145 to 175 basis points wider than February's, Moody's▲+0.83% — Moody's, up 0.83 percent today has the notes on negative outlook, and S&P sits at BBB-, one notch above junk ⁶.

Project finance is already retreating: a $25 million loan slice tied to Oracle's New Mexico Stargate campus, under a force majeure notice, is in a Dutch bank ING's loan auction↗ with bids due November 19, and the campus's power permit deadline was waived into an early-December hearing↗ ⁸⁹.

The bulls' math still has to clear December

Bernstein, the brokerage, reiterated Outperform and a $325 target↗ on November 10, saying Oracle will not need additional funding and turns free-cash-flow positive in the second half of fiscal 2028 ¹⁰. Its case leans on renewal pricing: co-CEO Clay Magouyrk said in September that GPUs up for renewal, mostly four years old, were renewed or resold at a 20% premium, and IREN▲+1.22% — IREN, up 1.22 percent today, a miner turned AI cloud operator, recontracted older H100s at double the original price ³.

Against that, analysts expect $61.7 billion of cash burn across fiscal 2027 and 2028 ³. Washington and Microsoft's own workload choices, not weak AI demand, removed this week's contracts, which is the bear case's weakness too: neither is proof the backlog is rotting.

December decides whose math holds

Oracle's fiscal second-quarter report, due mid-December, must show cloud growth of 65% to 71% and a backlog holding above $664 billion↗, roughly Microsoft's $677 billion on a fifth of the revenue ¹¹. The number to watch is renewal pricing on old GPUs, now that Microsoft is gone. Oracle promised investors no more money. It did not promise the customers would stay.

For the funding promise itself, read our October 31 piece, "Oracle caps AI fundraising at $20 billion and promises $30 billion of free cash flow in fiscal 2029".