Oracle’s lofty plans for developing its artificial intelligence infrastructure have encountered an extra financial hurdle as nearly $18 billion in borrowings tied to its Project Jupiter data center in New Mexico come under strain. The debt has apparently been mentioned at around 89-91 cents to the dollar and is is seen by lenders and investors to be raising alarms about ‘Oracle’s spiraling borrowings, and the project’
Project Jupiter is a 1,400-acre data center campus in Doa Ana County, New Mexico. The site is funded by Oracle under its form arrangement with OpenAI for supply of infrastructure to support training AI models, and is connected to the Mysterium(‘Stargate’) co-planning system to support creation of large-scale AI-focused infrastructure within the US.
Around $18 billion in project-finance loans from a group of banks was also used to fund the construction, including those from Santander and Jefferies. The initial strategy was to widen the investor base and opportunities still this has been said to be stalled and enquiries since undertaken have faced obstacles due to increasing worries about Oracle’s cashflow, the project and other financial matters.
An obvious issue is the new worth of the debt. Truth is some of these loans are trading below their initial value shows the markets are not willing to hold them without a discount. When quotes are published at 89 to 91 on the dollar that suggests the debt has come under a clear market test. It also results in banks ending up with additional project debt with Oracle on their books than they originally targeted following the response to their efforts to sell off parts of the financing.
Local opposition has introduced another source of unpredictability. Local residents and environmental organizations have expressed concerns about the possible effect of a large AI data center on the water supply and air quality in southern New Mexico. The project’s power needs have also taken on a more prominent role in the discussion as huge data centers have large demands for reliable electricity.
Oracle has modified its power proposal midway through the design process. Oracle and its infrastructure partner Yucca Growth Infrastructure unveiled plans for a new system based on Bloom Energy’s solid-oxide fuel-cell technology, replacing the initial proposal for natural-gas turbines and diesel generators. Oracle claimed the new design would use less water and emit less pollution than the original proposal.
Permitting is not settled either. On September 14, Oracle announced that the data center campus and its micropower site are separate facilities located on neighboring parcels and subject to separate permitting processes. Construction of the data center is proceeding under the usual county permits, and the neighboring micropower site does not require the air-quality permit used in the separate speed-bump proceeding.
Oracle has highlighted the economic benefits it anticipates from Project Jupiter. In July the company announced that the project had already generated nearly $80 million in state and county tax revenues and employed nearly 700 New Mexico residents onsite. Oracle anticipates the project may eventually provide more than 7,000 construction jobs and about 1,500 additional positions sustained through the project.
