The market sentiment has changed! Oracle Corporation (ORCL.US) has struggled to secure a $38 billion loan, and Wall Street's enthusiasm for AI infrastructure is dwindling.

Notice that JPMorgan and Mitsubishi UFJ Financial Group, Inc. Sponsored ADR once made a bold bet: underwrite a record-breaking $38 billion loan to support Oracle Corporation's new data center projects in Texas and Wisconsin. That was in August last year. According to sources, a few months later, after over twenty banks and other investors joined to share the risk, the deal is close to completion. One source stated that some loan institutions are still seeking to sell portions of the loan totaling less than $10 billion. For the banks involved in the deal, successfully pushing forward the largest-ever financing transaction for data center projects, especially in the current political turmoil surrounding GEO Group Inc and the increased perception of default risk for Oracle Corporation, is undoubtedly a relief. However, some view the effort by loan institutions to find investors on a large scale as a warning sign in itself. This indicates that appetite in the market for financing large-scale data center projects, which have borrowed around $275 billion since last year, is waning. As part of a massive "Stargate" AI infrastructure contract signed between Oracle Corporation and OpenAI, loan institutions have been working to raise more funds. The contract was initially envisioned to involve investments of up to $50 billion over four years. With the debt default insurance costs for this tech giant (whose free cash flow has remained negative) soaring in recent months, this financing requirement becomes more challenging, leading to a high concentration of risk among Financial Institutions, Inc. Management consulting firm Arthur D. Little's partner responsible for data center operations, Sean McDevitt, stated, "The market is seeing a flight to quality, but I don't think it's because AI demand is slowing down. It's that reality is catching up to ambition. Demand is still there, the challenge now is execution." Oracle Corporation has pushed the financing of this project to the limit of the project finance construction loan market. In this model, lenders invest in the project itself rather than the company, in order to remove the debt from the balance sheet. Sources say that as the deal nears completion, some banks hold more debt than anticipated, indicating that data center projects with Oracle Corporation as the target tenant are facing stricter scrutiny. The loans for the Texas and Wisconsin construction projects are being developed by Vantage Data Centers, as part of Oracle Corporation's "Stargate" contract. The contract also includes a $18 billion debt package for the New Mexico campus and a $14 billion financing for the Michigan campus. After months of on-and-off negotiations with investors, the latter is still in the final stages of completion. A source stated that the data center for Hub Group, Inc. Class A in Texas is funded by a $23 billion loan, expected to be completed in the coming weeks, followed by a $15 billion debt for the Wisconsin project. Silver Lake Investment and DigitalBridge Group have jointly committed $3 billion in equity investment for the project. Since the deal was first syndicated, Oracle Corporation's debt insurance costs have steadily increased, reaching a historical high in March, becoming a key indicator for Wall Street to measure AI credit risk. Sources mention that the funding was originally expected to be subscribed in December and January, prompting lenders to cast a wide net to attract various investors, including insurance companies and infrastructure funds. One source mentioned that their outreach even extended to Asia. The funds are structured as "delayed draw A term loans," allowing borrowers to withdraw the full amount in installments over a period of time. To make small subscriptions more attractive, investors recently received a 1% upfront fee discount, with the loan selling at a price 2.5 basis points above the Secured Overnight Financing Rate (SOFR) benchmark. Oracle Corporation recently appointed a new CFO to manage its extensive data center development plans. According to Standard Pool Corporation's global rating data, Oracle Corporation's significant spending on expanding capacity to run customer computing processes is expected to result in operational negative free cash flow in the coming years. The fate of the company is increasingly intertwined with OpenAI, the creator of ChatGPT, which is also burning cash and shows no short-term signs of profitability. When Oracle Corporation showed willingness to tighten some lease terms, the Michigan project saw a breakthrough. In this lengthy transaction, another turning point was when Bank of America Securities spent months attempting to assemble financing, and The Pacific Investment Management Company (PIMCO) agreed to provide anchor funds for a portion of the $14 billion debt. Arthur D. Little's McDevitt stated, "Many participants are acting rapidly and aggressively to secure their position in the AI ecosystem, trying different methods to achieve this goal."