Oracle (NAS:ORCL), a cloud services and infrastructure provider, saw its stock decline 6.47% to $131.54 on the 13th (local time) in New York trading as the impact from last week's credit rating downgrade continued. The decline followed Standard & Poor's (S&P) downgrade of Oracle's credit rating from BBB to BBB- last week, with concerns emerging that Apple's lawsuit against OpenAI could indirectly affect Oracle. Oracle's cloud infrastructure business faces scrutiny due to its partnership with OpenAI, which signed a $300 billion computing contract with Oracle last year.
S&P Downgrades Oracle Credit Rating to BBB-
S&P downgraded Oracle's credit rating from BBB to BBB- last week, according to analysis from Motley Fool. The credit rating agency's action preceded the stock decline that continued through trading on the 13th. According to data from Yonhap Infomax stock current price (7219 screen) on the 14th, Oracle's stock price closed New York trading at $131.54, down 6.47% from the previous day.
Apple Files Lawsuit Against OpenAI and Former Employees
Apple filed a lawsuit on the 10th (local time) against OpenAI and two former Apple executives who moved to OpenAI in the Northern District Federal Court of California, alleging trade secret violations. Motley Fool noted that while the outcome of Apple's lawsuit remains uncertain, it could represent negative news for Oracle as an OpenAI partner. The lawsuit's indirect impact on Oracle emerged as a concern following the credit rating downgrade.
Oracle's $300 Billion OpenAI Contract Faces Payment Risk
Oracle signed a $300 billion computing provision contract with OpenAI last year, after which credit default swap (CDS) prices began rising, Motley Fool observed. Investors have raised questions about OpenAI's revenue generation and its ability to fulfill contractual obligations, leading to concerns about Oracle's AI infrastructure construction costs. S&P estimates that OpenAI accounts for half of Oracle's remaining performance obligations. If OpenAI fails to make payments to Oracle, Oracle could be left with massive data center lease contracts it cannot terminate or would need to offer to new tenants under much less favorable terms.
S&P Assigns Stable Outlook Despite Rising Risks
S&P assigned a 'stable' outlook to Oracle, but Motley Fool noted that risks are increasing. The analysis added that if Apple succeeds in its lawsuit, the risks could grow larger. The combination of the credit rating downgrade and potential complications from the Apple-OpenAI legal dispute contributed to investor concerns reflected in Oracle's stock performance on the 13th.
FAQ
Why did Oracle stocks fall on the 13th?
Oracle stocks declined 6.47% to $131.54 on the 13th (local time) due to continued impact from S&P's credit rating downgrade from BBB to BBB- last week and concerns that Apple's lawsuit against OpenAI could indirectly affect Oracle as an OpenAI partner.
What is Oracle's relationship with OpenAI?
Oracle signed a $300 billion computing provision contract with OpenAI last year. S&P estimates that OpenAI accounts for half of Oracle's remaining performance obligations, making the partnership financially significant for Oracle's cloud infrastructure business.
What credit rating did S&P assign to Oracle?
S&P downgraded Oracle's credit rating from BBB to BBB- last week and assigned a 'stable' outlook to the company, though analysts note that risks are increasing due to concerns about OpenAI's ability to fulfill its contractual payment obligations.
