$Oracle(ORCL.US) $Blue Owl Capital(OWL.US)
THE ORACLE BLUE OWL SITUATION:One reason we could be seeing pain across the entire market today is because Blue Owl, a private credit lender, has been financing a TON of these new datacenter deals, including many from $Meta Platforms(META.US).Today, they came out and said they would not be taking on one of Oracle’s $10B datacenter deals.Now, Oracle came out and said they chose to go with someone different (Blackstone stepped in) but the market is perceiving Blue Owl’s hesitancy here as a sign of concern over Oracle’s debt. What’s the issue? Well, Oracle has $127B in debt.$25B of that debt is due within three years.Oracle has generated around $13B in cash flow over the last year, which is great, but with all the debt…they aren’t expected to get back to positive FCF until 2028. This is why their credit default swaps are up 200% in the past few months, bond market is hedging aggressively on if Oracle can’t pay back the debt.The only way for them to pay it back? That $500B of RPO…has to be real. If they can’t generate that revenue, they won’t have the cash flow to show they can pay back the debt. As a result, any datacenter play now falls within the same bucket: the market thinks they are all over leveraged, can’t pay back the debt, may not get an ROI on their capex, don’t deserve a premium. These fears may be misplaced, but this seems to be driving the AI selloff today.Source: amit
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