By Rashika Singh Feb 2 (Reuters) – Oracle shares gained 2% on Monday after Wall Street analysts said the software company's $50 billion fundraising plan allays worries over its ability to finance a massive data-center expansion with OpenAI. Long a smaller player in the cloud market, Oracle has emerged as a major player in the business of renting computing power over the past year, thanks to its $300 billion deal with OpenAI. But investors have grown worried about how it would fund the data-center expansion needed to serve OpenAI and other customers, including Elon Musk's xAI and Meta. Its shares fell more than 15% last year, as its results in December showed a cash burn of around $10 billion for the first half of the fiscal year. The company said on Sunday it expects to raise between $45 billion and $50 billion in calendar 2026 through a combination of stock sales and debt, arguing that the move reflected its commitment to maintain an investment-grade rating amid the AI spending. As much as $20 billion of that is expected to come from sales of its shares at the market price, while the rest would be funded by the sale of bonds early in 2026. The company said it does not expect to issue additional debt beyond that this year. "Oracle is not only saying they're committed to investment-grade debt, but they are sending a clear message to bond investors and the rating agencies that they are," Guggenheim analysts said. Oracle disclosed on Monday that it has filed for an offering of 100 million depositary shares. "We can see how the debt markets will likely be calmer post this transaction as the combination of extra equity and the mandatory convertible will reduce the debt needs and strengthen Oracle's balance sheet," Barclays analysts said in a note. Investors sold Oracle's credit-default swaps that offer bondholders a hedge against default. Both its 10-year CDS and 5-year CDS dropped about 35 basis points each, according to Markit Data. Goldman Sachs will lead the bond sale, while Citigroup will manage the equity and convertible preferred offerings. DOUBTS REMAIN OVER AI Still, investors remain cautious over whether the hundreds of billions tech firms are spending on AI infrastructure would pay off given limited evidence of real-world productivity gains. Strong reception for Google's latest AI model and a deal for the company's technology to power Apple's AI features have also put pressure on OpenAI in the high-stakes race. "The perception is that Oracle's fortunes are now heavily tied to OpenAI and combined with the company's plans to raise up to $50 billion to invest in 2026, nervousness about the situation looks unlikely to go away any time soon," said Russ Mould, investment director at AJ Bell. Oracle has faced heightened scrutiny following a bondholder lawsuit in January and last year's spike in its credit default swap costs. Jefferies analysts said the financing plan "buys time" for Oracle's AI ambitions, but warned it could weigh on margins in the near term, and said free cash flow was unlikely to turn positive until FY29. (Reporting by Rashika Singh in Bengaluru; Editing by Shilpi Majumdar)
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