Investment bank TD Cowen has warned that Oracle may need to take drastic steps to address growing concerns around its ability to finance one of the largest data center expansion programs in the technology sector. According to a recent TD Cowen research note, Oracle could seek to ease funding pressure by laying off as many as 30,000 employees and potentially divesting its health technology unit Cerner.
The warning comes as Oracle pushes forward with a massive data center construction program tied to a reported $300 billion, five-year infrastructure commitment to OpenAI, alongside additional builds for Meta and NVIDIA.
TD Cowen estimates Oracle’s total infrastructure obligations across these customers at roughly $523 billion, placing unprecedented strain on the company’s balance sheet and access to capital markets.
Rising Capital Needs and Investor Scrutiny
TD Cowen estimates that the OpenAI build-out alone will require approximately 3 million GPUs and associated IT infrastructure, translating into around $156 billion in capital expenditures. Investor anxiety intensified last year when Oracle raised its projected 2026 capital spending by $15 billion, bringing the total to roughly $50 billion for that year alone. Since then, both equity and debt investors have grown increasingly cautious, a shift reflected in widening credit default swap spreads and sustained pressure on Oracle’s share price and bond yields.
According to the research note, employment reductions on the scale outlined could free between $8 billion and $10 billion in cash flow. While meaningful, TD Cowen suggests this would cover only a fraction of Oracle’s near-term funding requirements. The bank notes that Oracle has already tapped debt markets aggressively, raising nearly $58 billion in just two months, including $38 billion for projects in Texas and Wisconsin and a further $20 billion tied to developments in New Mexico.
However, that level of borrowing appears insufficient given the scale of the planned build-out, and U.S. lenders are becoming increasingly reluctant to extend further credit. TD Cowen reports that U.S. banks have largely retreated from financing Oracle-related data center projects, driving borrowing costs sharply higher. Interest rate surcharges for Oracle-backed data center financing have reportedly quadrupled since September, pushing borrowing terms into territory typically associated with non-investment-grade borrowers.
Cancelled Facility Leases
The tightening of credit has had knock-on effects across the data center ecosystem. Private operators seeking to lease capacity to Oracle have struggled to secure financing, leading to stalled or cancelled lease discussions. Without access to capital, these operators are unable to construct the facilities Oracle requires, effectively blocking portions of the company’s infrastructure expansion strategy.
Asian lenders, according to TD Cowen, have stepped in to partially fill the gap left by U.S. banks, offering financing at premium rates in exchange for exposure to AI-driven infrastructure growth. While this provides Oracle with alternative funding channels for overseas projects, it does little to resolve constraints on domestic U.S. capacity, which remains critical for servicing customer demand.
In response to these pressures, Oracle has reportedly begun requiring upfront payments from new customers, with TD Cowen citing figures of up to 40% of contract value. The approach effectively shifts part of the financing burden to customers, helping Oracle fund construction while reducing immediate capital outlays. Analysts note, however, that such measures may limit customer flexibility and could influence demand over time.
TD Cowen concludes that persistent funding constraints raise fundamental questions about Oracle’s ability to scale revenue if it cannot deliver the data center capacity its largest customers are planning for. The coming quarters are likely to test whether asset sales, cost reductions, and alternative financing structures are sufficient to sustain Oracle’s ambitious infrastructure push.
Executive Insights FAQ
Why is Oracle facing funding pressure?
Investor concern is growing over Oracle’s ability to finance massive data center expansion tied to large AI infrastructure commitments.
How much capital is required for the OpenAI build-out?
TD Cowen estimates around $156 billion in capital expenditures for OpenAI-related infrastructure alone.
What role are layoffs expected to play?
Potential job cuts could free $8–10 billion in cash flow, easing but not resolving funding challenges.
Why are U.S. banks pulling back?
Rising risk and capital intensity have driven lenders to retreat, significantly increasing borrowing costs.
How is Oracle responding?
The company is exploring asset sales, upfront customer payments, and alternative international financing sources.
