Oracle Stock Slides 4% After Blue Owl Capital Withdraws from $10 Billion Data Center Funding Talks
Oracle Shares Tumble on Funding Uncertainty
Shares of **Oracle Corp.** (**ORCL**) experienced a notable decline on Tuesday, falling approximately 4% after news broke that private lender **Blue Owl Capital** had withdrawn from discussions to fund a massive $10 billion data center project. The stock closed the session at **$179.60**, down from its open price of $183.31, contributing to a mixed day for the broader market indices, including the Dow, S&P 500, and Nasdaq.
The proposed data center, reportedly intended to support **OpenAI**'s expanding infrastructure needs, is a critical component of Oracle's strategy to aggressively grow its cloud computing footprint. The withdrawal of Blue Owl Capital, a significant private financing source, casts a shadow over the project's financing structure.
Scrutiny Over Debt and Off-Balance Sheet Financing
The decision by Blue Owl Capital to exit the funding talks comes amid heightened scrutiny regarding Oracle's increasing use of debt and off-balance sheet financing to fuel its capital-intensive cloud expansion. While Oracle has successfully leveraged this strategy to fund rapid growth, the reliance on external, non-traditional financing methods has drawn attention from investors concerned about the company's financial leverage.
Oracle's $10 billion data center project has lost the backing of private lender Blue Owl Capital. It comes amid scrutiny of increasing use of debt and off-balance sheet financing.
Despite the funding setback, Oracle quickly moved to reassure the market, stating that the data center project remains **"on schedule."** However, the company confirmed that Blue Owl was definitively out of the funding negotiations, leaving the source of the $10 billion in capital an open question for investors.
Market Impact and Financial Resilience
The immediate market reaction saw ORCL stock slide, reflecting investor nervousness about the execution risk associated with such a large-scale project lacking committed financing. However, a look at Oracle's recent financial performance suggests the company has maintained strong momentum leading up to this event. Over the past two years, the stock has demonstrated significant resilience and growth:
- **Total Return (2 years):** 74.87%
- **Annualized Return/CAGR (2 years):** 32.24%
- **Sharpe Ratio (2 years):** 0.61, indicating a reasonable risk-adjusted return.
- **Maximum Drawdown (2 years):** A minimal 0.10%, suggesting low volatility relative to its gains.
The stock's volatility, measured by a standard deviation of the close price at 53.22, is balanced by its strong upward trajectory. The highest close price recorded in the last two years was 327.76, and the lowest was 100.23, highlighting the significant appreciation in value.
Forward Outlook and Sector Implications
The need for massive data center capacity is driven by the explosive demand for generative AI and cloud services, making the $10 billion project crucial for Oracle to compete effectively with rivals like Amazon Web Services and Microsoft Azure. While the company insists the project is on track, the market will be closely watching for details on the replacement financing. The incident underscores the broader challenge facing technology companies that rely on private capital markets to fund multi-billion-dollar infrastructure projects, especially as interest rates and scrutiny over corporate debt levels remain elevated.
