S&P Global has downgraded Oracle's credit rating from BBB to BBB-, placing it just one notch above speculative-grade territory. This downgrade, effective July 9, stems from Oracle's significant investments in its rapidly expanding AI infrastructure business, which is increasing the company's debt and capital requirements.

S&P forecasts a free operating cash flow deficit of nearly $42 billion for fiscal year 2027, driven by projected $90 to $95 billion in spending on AI data centers. The rating agency views Oracle's substantial reliance on a single major customer, OpenAI, as a critical risk, estimating it accounts for roughly half of Oracle's unfulfilled service volume. A default by OpenAI could leave Oracle with unmanageable data center leases.

The downgrade also reflects Oracle's ongoing transition from a software company to a hyperscaler, with its cloud infrastructure business expected to grow significantly. However, S&P notes Oracle is in a weaker position compared to competitors like Microsoft and Amazon. This situation aligns with broader warnings from financial regulators, including the Bank for International Settlements, about debt-financed AI investments.