Oracle's New Mexico Pipeline Setback Adds to Growing Credit Market Alarm
Published on 07/19/2026 at 13:53 | Redaktion boerse-global.de
Oracle's plan to power its Project Jupiter AI data center in New Mexico has hit a second regulatory wall in four months, forcing a costly technology pivot that underscores the operational and financial pressures piling up on the software giant. State Land Commissioner Stephanie Garcia Richard rejected Energy Transfer's application on July 14 to build a 27-kilometer natural gas pipeline across state trust land, citing minimal revenue and environmental concerns. “Gigantic AI data centers like Project Jupiter can rapidly deplete critical resources like water and endanger ecosystems through shocking emission levels,” she wrote. The decision, following a similar rejection in March, leaves the Texas pipeline operator with 30 days to file an appeal — or Oracle will proceed entirely with an alternative fuel-cell system from Bloom Energy that has already inflated costs by billions.
The pipeline setback is just one symptom of a broader strain: Oracle's debt-fueled AI expansion is alarming bond investors. Credit default swaps on the company hit a record high on July 19, according to Bloomberg data, reflecting a sharp increase in the perceived risk of default. The move came just days after S&P Global downgraded Oracle to BBB- on July 9, citing a “persistent underestimation” of capital expenditure by management. Analysts at Voice of Emirates have warned that the company's deepening reliance on financing could trigger another rating review.
The numbers underlying the concern are staggering. In fiscal 2026, Oracle poured $55.7 billion into data center construction, a 162% leap from the prior year. Free cash flow swung to negative $23.7 billion, while total debt surpassed $130 billion. Revenue rose 17% to $67.4 billion, but the spending pace shows no sign of easing: net capex guidance for fiscal 2027 stands at roughly $70 billion, with gross outlays between $90 billion and $95 billion. Oracle's massive backlog of $638 billion — about half of which comes from OpenAI — remains the centerpiece of its growth narrative. Yet the company also cut its workforce by 13% to 141,000 employees, incurring $1.8 billion in restructuring charges.
Should investors sell immediately? Or is it worth buying Oracle?
The New Mexico project, originally budgeted at $16.5 billion, now faces billions in additional costs from the switch to fuel cells. Similar cost overruns have emerged in Wisconsin, where transmission expenses and rating-related requirements added more than $100 million. The Information has also reported undisclosed billion-dollar surprises across Oracle's data center portfolio, though the company has not commented on those details.
Institutional investors have responded with divided strategies. Jennison Associates trimmed 26.3% of its stake in the first quarter, selling 2.48 million shares, but still holds a position worth roughly $1.02 billion. Assetmark cut 43.6% of its holdings, and Kinsale Capital Group reduced by 39%. On the buy side, Copeland Capital Management opened a new $4.56 million position, while SEB Asset Management added 382,268 shares valued at about $56.24 million. Oracle Vice Chairman Jeffrey Henley sold 400,000 shares on June 24 under a pre-arranged trading plan at $159.16.
Despite the turmoil, the analyst consensus remains a buy, with a price target averaging $268.27, while Simply Wall St pegs fair value at $242.10. Oracle itself targets $171.1 billion in revenue and $36.6 billion in profit by fiscal 2029, implying annual growth of roughly 38.7%. The stock closed Friday at €110.56, a 1.79% bounce from its recent lows but still just 5.20% above its 52-week trough. The relative strength index of 29 signals an oversold condition, and the shares have fallen 48.48% year-to-date, with volatility over the past month running at an annualized 47.23%.
With the 30-day appeal window for Energy Transfer still open, the regulatory fate of the New Mexico pipeline remains uncertain. If the decision stands, Oracle will lean harder on the Bloom Energy fuel-cell solution — a workaround that has already added billions to the project's bill. Combined with the credit rating pressure and a cash burn that shows no sign of slowing, Oracle's AI infrastructure bet faces mounting scrutiny on both operational and financial fronts.
Ad
Oracle Stock: New Analysis - 19 July
Fresh Oracle information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.
Disclaimer regarding our articles: No investment advice, no buy or sell recommendation. Information on prices, companies, and markets is provided without guarantee; changes are possible at any time. Stock market transactions can lead to substantial losses. Our articles are created and reviewed in whole or in part automatically with the support of AI.
