S&P Global downgrades Oracle's credit rating to BBB- (one notch above junk) citing OpenAI as key credit risk, with $638B in AI compute contracts.

S&P Global has downgraded Oracle's credit rating from "BBB" to "BBB-," citing OpenAI as a "key credit risk." The one-notch downgrade places Oracle just above junk status, reflecting the company's mounting exposure to the privately held artificial intelligence firm.

Oracle's AI infrastructure buildout is consuming far more capital than anticipated. S&P now projects capital spending will reach $95 billion by 2027, a significant increase from the previous $60 billion estimate. The agency warns that meaningful revenue from these investments will not materialize for years. OpenAI accounts for roughly half of Oracle's $638 billion in contractual obligations, creating acute dependency risk. Should OpenAI collapse, Oracle would be left managing massive data center capacity with no way to fill it.

S&P notes that Oracle faces greater vulnerability than AWS, Google, and Microsoft, which possess internal workloads capable of absorbing excess capacity and maintain deeper financial reserves. Nevertheless, the rating agency cautioned that even these tech giants would face serious balance sheet impacts if OpenAI were to fail.

Concerns about OpenAI's sustainability are building across the financial sector. SoftBank was forced to reduce a loan secured by OpenAI shares from $10 billion to $6 billion, as lenders struggled to assign a valuation to the privately held company. OpenAI has postponed its initial public offering to 2027, further delaying clarity on its financial viability.