Oracle shares fell about 7% on Oct. 14 even after Mizuho reiterated an outperform rating. Investors appear focused on the company's cash burn and debt as it builds its Project Jupiter data center.
Oracle stock tumbled 7% through 10:10 a.m. ET on Oct. 14, right after Mizuho analyst Siti Panigrahi reiterated an outperform rating. The stock traded around $133, against the $320 value Panigrahi still puts on the shares.
Mizuho points to construction progress
According to Panigrahi, Oracle is making "continued construction progress" on Project Jupiter, the AI data center Oracle is building in the New Mexico desert for $165 billion. Oracle has proposed rerouting the gas pipeline that supplies power to the site through Bloom Energy fuel cells, a move meant to avoid restarting its environmental review.
The analyst is optimistic this effort will succeed. However, he notes that investors must wait for further updates on Oct. 28.
Credit downgrade and cash burn weigh on shares
Investors do not seem willing to wait. According to StreetInsider.com, Oracle recently suffered a credit rating downgrade to BBB-, one notch above speculative, on worries that it is spending too much on capital investment for Project Jupiter with little revenue to offset the costs.
OpenAI isn't required to make payments for the data center before 2027, and Oracle's cash situation could look tenuous in the meantime. Data from S&P Global Market Intelligence show $37.1 billion in cash and a burn of nearly $29 billion a year.
The same data show Oracle at risk of needing to add to its $169.1 billion debt load.
Source: The Motley Fool
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