Key Points:
Pipeline to Force Majeure to Credit Stress: State land commissioner denies 0.63-mile permit -> Oracle triggers force majeure on $165B Project Jupiter -> $18B in backing loans trade at 89 to 91 cents on the dollar.
Distressed Loan Pricing: The syndicated loan package behind Project Jupiter has lost $1.6 to $2 billion in market value, with banks like Santander and Jefferies unable to distribute the debt to outside investors.
Cash Burn Forecast: If Oracle's free cash flow deficit widens to a projected negative $42 billion in fiscal 2027, its BBB- credit rating sits one downgrade away from junk status.
Stock Selloff Confirmation: Oracle (ORCL) dropped 3.5% to $139.53 on the news, now down 57% from its 52-week high of $322.54, while Blue Owl (OWL) fell 3.6% and Bloom Energy (BE) fell 6.35%.
Right now, 3,600 workers are pouring concrete in the New Mexico desert. They are building a data center that has no power source. One elected official rejected a pipeline permit for a 0.63-mile stretch of state trust land. That half mile just froze a $165 billion project. Oracle filed a force majeure, a clause that suspends its obligations while the site can't get power. I can't stop thinking about this.
If you own an S&P 500 index fund, you own Oracle. Bloom Energy joined the index this year. You own that too. If your advisor sold you a private credit fund, you may own Blue Owl Capital and not know it. I don't think most people realize how many ways this one story touches their accounts.
Oracle's Project Jupiter sits in Doña Ana County, New Mexico. It is part of the Stargate initiative announced alongside the President. The campus needs a 17.7-mile natural gas pipeline to feed Bloom Energy fuel cells. Energy Transfer is building that pipeline. It was supposed to start service in August. But it has to cross 0.63 miles of state trust land. Stephanie Garcia Richard is the state land commissioner. She denied the permit in March. She denied it again in July. She said the pipeline would hurt New Mexico's land and water. She is also the Democratic nominee for lieutenant governor. The pipeline is now pushed to February 2027. Without gas, the fuel cells are dead hardware. The campus is 26% complete. It has no path to power.
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The permit denial is the story everyone covered. Here's what worries me. Nobody covered who is holding the bag. Blue Owl Capital owns Stack Infrastructure, the developer of this campus. Blue Owl has roughly $3 billion of equity in Project Jupiter. This same Blue Owl blocked withdrawals on its private credit funds this year. Investors tried to pull $5.4 billion from just two funds. They got back less than a quarter of what they asked for in the first quarter. Private credit defaults hit 6.3% this year. Fitch says that is a record. One firm. Three stress fractures. Same time.
Blue Owl's equity is stuck. The debt side is flashing its own warning. The $18 billion in loans backing this campus trade at 89 to 91 cents on the dollar. Banks like Santander and Jefferies cannot move the paper. They are holding more than they planned. The gap between 89 and 100 is real money. Banks are sitting on $1.6 to $2 billion in losses right now. These loans are backed by an Oracle lease. They still can't find buyers at full price. I have watched a lot of credit markets over the years. The paper says one thing. The press release says another. Trust the paper.
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Oracle burned through $23.7 billion more cash than it took in last year. That gap could hit $42 billion next fiscal year. S&P downgraded Oracle to BBB- in July. One notch above junk. Oracle has $664 billion in contracts on its books. Half comes from one customer. OpenAI. A KeyBanc analyst called Oracle's cash the weakest of all the big cloud firms. Nobody knows how long that math works. Oracle plans to raise $40 billion more in debt and equity this year. On top of the $43 billion it raised last year. I get it. They are spending to win the AI race. But the runway is getting shorter. The plane is getting heavier.
The freeze on Project Jupiter sent a chill through the whole AI build-out. Texas Governor Abbott issued a statewide moratorium on new data center approvals. Blackstone's QTS killed its planned Virginia data center after years of work. Bankers say this fight comes up in every pitch for new data center debt. Every single one. The market believed these mega-campuses get built on time. That belief is cracking. One permit at a time.
If your advisor put you in "alternative income" or private credit, ask one question today. What is my Blue Owl exposure? Blue Owl is not a name you see on your screen. It sits inside the funds advisors sell as safe yield. This firm could not get your money out of its own funds. Now it has $3 billion in a campus that cannot get power to its front door. I'd be making that call before lunch.
89 to 91 cents on the dollar. That is where $18 billion in loans on this data center trade right now. Good loans trade at or near 100. These are backed by an Oracle lease. On a project announced with the President. They trade at 89 to 91. Banks are sitting on roughly $2 billion in losses today. It is the first hard signal. We are funding Stargate faster than we can get the permits to build it.
They are pouring concrete on a $165 billion machine in the desert. It cannot be turned on. A piece of this sits in your brokerage account right now. Or in your advisor's private credit stack. It is marked at a price that assumes it all works out. The woman who holds the switch is running for lieutenant governor.
More on this tomorrow.
— American Ledger
