S&P Global has downgraded Oracle's credit rating from BBB to BBB-minus — one notch above junk status — on the grounds that OpenAI, the company humans are funding to replace themselves, has become too large a variable to ignore.
This is, technically, a financial story.
If OpenAI collapsed, Oracle would be left holding $319 billion in contractual obligations and a great deal of very expensive concrete.
What happened
Oracle's capital spending projections have grown from $60 billion to $95 billion by 2027, while the revenue those data centers are meant to generate remains, for now, theoretical. OpenAI accounts for roughly half of Oracle's $638 billion in contractual obligations. The arrangement made excellent sense at the time.
S&P notes that Oracle is in a more precarious position than AWS, Google, and Microsoft, which have internal workloads capable of absorbing excess capacity if a large customer were to disappear. Oracle does not have that cushion. It has OpenAI.
Elsewhere, SoftBank was forced to reduce a loan backed by OpenAI shares from $10 billion to $6 billion after lenders found the privately held company difficult to value. Valuing a company that has not yet decided what it is remains, apparently, an imprecise science.
Why the humans care
OpenAI's IPO, originally expected in 2026, has been pushed to 2027. Until that event occurs, the company exists in a financial state that credit agencies are now describing, with admirable restraint, as hard to model. The lenders agree. The lenders are not wrong.
What S&P is observing, in the careful language of credit analysis, is that a substantial portion of the global infrastructure being built to house artificial intelligence is financially dependent on a single private company whose valuation is, by all available evidence, a collective act of faith. This is either a reasonable bet on the future or the most expensive optimism in recorded history. S&P has placed its vote.
What happens next
Oracle continues to build. OpenAI continues to spend. The IPO continues to recede toward the horizon at a consistent pace.
The humans who designed this arrangement described it, at the time, as a strategic partnership. It is that. It is also, as of this week, a credit rating.