Oracle Is First AI Domino To Fall After Barclays Downgrades Its Debt To Sell

Two months ago, when nobody was thinking about the massive debt that would be required to fund the trillions in data center capex spending, and when absolutely nobody was paying attention to Oracle's CDS, we published "The Stunning Math Behind The AI Vendor Financing "Circle Jerk", in which we laid out all the weakest links in the global AI revolution thesis, including the dismal return on equity (which was hardly a new topic), the ridiculous circle-jerk vendor financing schemes concocted by the handful of top players to pretend their revenue is growth at a torrid pace (and pushing the market cap to the stratosphere), but more importantly, we highlighted the growing bifurcation within the hyperscaler space between companies that do have the cash from operations to fund their growth and massive capex budgets, and those that don't... with Oracle the clear standout in this group. This is what we said:

Oracle crashed the AI bubble party on Sept 10 with all the grace of a bull in a China shop, when it unveiled one of the biggest circle jerk vendor financing deals of all time (more below), announcing a massive $300 billion, five-year cloud computing deal with OpenAI. 

In retrospect, Oracle - which has since erased all of its gains from its deal announcement and almost all gains from its "batshit insane" hockeystick revenue projections which revealed the company added a mindblowing $317 billion in future contract revenue with just three different customers...

... could have been less painful had Oracle also not reminded everyone that it, drumroll, doesn't actually have the money to pay for this spending orgy which is now projected to last well into the 2030s (without any recession on the horizon, of course, because nobody ever forecasts a recession).

We also quoted from a recent note by JPM's Michael Cembalest who framed the problem as follows