Moody’s Flags Oracle’s ’Counterparty Risk’ in Massive $300B AI Deal Shakeup

Oracle just got a reality check from the ratings giants—and it's hitting right as they push one of the largest tech deals in history.

Moody’s isn’t mincing words. The agency slapped a 'counterparty risk' warning on Oracle, raising eyebrows across fintech and traditional finance alike. At stake? A jaw-dropping $300 billion AI partnership that could redefine enterprise tech—or expose its weakest links.

Why the caution? Oracle’s playing in the deep end of AI infrastructure, and Moody’s thinks someone’s counting chickens before they hatch. When legacy systems meet breakneck innovation, somebody usually pays—and it’s rarely the C-suite.

Finance old guards love to talk about 'due diligence,' but nothing says trust like a ratings downgrade right before a historic deal. Maybe they’ve been auditing with their eyes closed.

One thing’s clear: in the high-stakes world of AI and Big Tech, even giants dance on shaky ground. Oracle’s move could cement its future—or become a very expensive lesson in ambition.

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During its first quarter earnings call, Oracle reported that Remaining Performance Obligations (RPOs) for AI cloud infrastructure bookings jumped 359% year-over-year to $455 billion. Moreover, CEO Safra Catz hinted that with more multibillion-dollar deals underway, RPOs could soon exceed half a trillion dollars.

Moody’s Analysts Call Out Potential Risks

In July, Moody’s downgraded Oracle’s credit outlook from Stable to Negative, assigning it a Baa2 rating, the lower end of investment grade. Analysts at the time warned that Oracle’s AI cloud business relies heavily on a small group of large customers.

Continuing along the same lines, analysts noted yesterday that “Counterparty risk is always a key consideration in any type of project financing, particularly where there is a high reliance on revenue from a single counterparty.”

Historically, Oracle’s data center business has served three major but undisclosed customers. With OpenAI now added as a fourth, Moody’s warned that the company’s debt could grow faster than its EBITDA (earnings before interest, taxes, depreciation, and amortization), pushing leverage to about 4x before its EBITDA begins to catch up. They also expect free cash FLOW to stay negative for a long time before breaking even.

Assessing Oracle’s Risk Factors

In its latest annual filing, Oracle added a new risk factor under the Tech & Innovation section. Oracle cautioned that insufficient data center capacity or poor infrastructure management could hurt profitability. This disclosure reflects similar risks Moody’s highlighted in its assessment of Oracle’s AI data center expansion.

Is ORCL Stock a Buy, Hold, or Sell?

On TipRanks, ORCL stock has a Strong Buy consensus rating based on 24 Buys and eight Hold ratings. The average Oracle price target of $340.75 implies 13.1% upside potential from current levels. Year-to-date, ORCL stock has surged 82.4%.