Trade The News story
Traders circulating WSJ article from this morning saying Oracle’s lease for the New Mexico facility contains “hell-or-high-water” terms, meaning the agreement cannot be terminated and Oracle remains obligated to make rent payments regardless of whether power has been secured to operate the data centers
- Oracle’s lease for Project Jupiter uses “hell-or-high-water” terms: the deal cannot be terminated, and Oracle must make rent payments regardless of whether it has secured power to operate the data centers (securing power was its responsibility). The force-majeure notice allows Oracle to delay the start of full rent payments for up to three years; the first phase was originally targeted for completion in the third quarter of 2028.
- Deferring payments does not reduce Oracle’s overall financial exposure—it automatically extends the lease duration so the total amount ultimately paid to Stack remains the same. During the construction/delay period Stack (for Blue Owl) is currently earning the equivalent of a 9% annualized return from the project’s raised funds; that rises to 11% once full lease payments begin.
- The financing package included reserves covering up to three years of potential delays. At least one arranging bank has already sold a portion of the $18 billion New Mexico construction loans below 90 cents on the dollar, implying a paper loss of at least $1.8 billion for the original lenders. In recent months Oracle removed BorderPlex Digital Assets (its key early land-and-power partner that began work in late 2024 and had initial support from the New Mexico governor); Oracle is paying BorderPlex to relinquish its rights to the project’s land and power.
- Oracle previously overhauled its original power plan (gas turbines plus diesel generators) because of local resistance, but still lacks the required state air permits, and a short section of the proposed 17-mile natural-gas pipeline that crosses state land has been rejected twice.
https://www.wsj.com/finance/investing/cracks-in-oracles-ai-data-center-build-out-appear-in-massive-new-mexico-project-effb51c2
**TTN Insight: Project Jupiter has moved the AI-credit debate from hypothetical cash burn into traded impairment. Oracle’s invocation of force majeure on the 2.45GW New Mexico campus matters because the first casualty is not OpenAI demand but the contractual bridge between an unfinished power site and the debt raised against it: Jupiter is reportedly already about a year behind, its roughly $18B of project debt is trading around 89–91, and Barclays estimates that a delayed energisation should also push back roughly $30B of Oracle hardware capex, normally spent only two to three months before a facility goes live. The damage is already escaping the SPV. Oracle CDS has widened to a record, its 2056 Baa2/BBB- bonds have yielded above 8% for the first time—briefly around 8.2%—and now trade wider than the roughly 7.5% average yield on B2/B corporate debt, an extraordinary inversion for an issuer still sitting inside investment grade. Morningstar has argued that a meaningful Stargate delay could ultimately cost Oracle roughly $25B of expected revenue and potentially push the credit as low as BB-; a fall below investment grade would matter mechanically as well as symbolically, with roughly $120B of Oracle bonds potentially leaving IG indices and being handed to a completely different marginal buyer. CoreWeave is showing the same repricing further down the chain: two CRWV bonds have now broken 13%, even with the equity around $88; the last time its credit crossed 13%, the stock was below $70 in June, suggesting creditors are deteriorating faster than equity this time. The important fracture in the AI stack is therefore occurring before anyone has had to decide whether OpenAI eventually generates enough cash to pay for all this compute. A pipeline route slips, an air permit moves, energisation shifts twelve months; Oracle delays $30B of hardware purchases; project debt falls into the 80s; the tenant’s supplier CDS widens; IG index eligibility becomes a live question; and a highly levered GPU lessor suddenly clears at 13%. The supposed credit enhancement was “contracted AI demand”; Jupiter is showing that a contract written against megawatts that do not yet exist can transmit construction risk all the way from a New Mexico gas pipeline into Oracle’s $120B bond complex and the financing cost of the GPUs that were meant to fill the building.
- Deferring payments does not reduce Oracle’s overall financial exposure—it automatically extends the lease duration so the total amount ultimately paid to Stack remains the same. During the construction/delay period Stack (for Blue Owl) is currently earning the equivalent of a 9% annualized return from the project’s raised funds; that rises to 11% once full lease payments begin.
- The financing package included reserves covering up to three years of potential delays. At least one arranging bank has already sold a portion of the $18 billion New Mexico construction loans below 90 cents on the dollar, implying a paper loss of at least $1.8 billion for the original lenders. In recent months Oracle removed BorderPlex Digital Assets (its key early land-and-power partner that began work in late 2024 and had initial support from the New Mexico governor); Oracle is paying BorderPlex to relinquish its rights to the project’s land and power.
- Oracle previously overhauled its original power plan (gas turbines plus diesel generators) because of local resistance, but still lacks the required state air permits, and a short section of the proposed 17-mile natural-gas pipeline that crosses state land has been rejected twice.
https://www.wsj.com/finance/investing/cracks-in-oracles-ai-data-center-build-out-appear-in-massive-new-mexico-project-effb51c2
**TTN Insight: Project Jupiter has moved the AI-credit debate from hypothetical cash burn into traded impairment. Oracle’s invocation of force majeure on the 2.45GW New Mexico campus matters because the first casualty is not OpenAI demand but the contractual bridge between an unfinished power site and the debt raised against it: Jupiter is reportedly already about a year behind, its roughly $18B of project debt is trading around 89–91, and Barclays estimates that a delayed energisation should also push back roughly $30B of Oracle hardware capex, normally spent only two to three months before a facility goes live. The damage is already escaping the SPV. Oracle CDS has widened to a record, its 2056 Baa2/BBB- bonds have yielded above 8% for the first time—briefly around 8.2%—and now trade wider than the roughly 7.5% average yield on B2/B corporate debt, an extraordinary inversion for an issuer still sitting inside investment grade. Morningstar has argued that a meaningful Stargate delay could ultimately cost Oracle roughly $25B of expected revenue and potentially push the credit as low as BB-; a fall below investment grade would matter mechanically as well as symbolically, with roughly $120B of Oracle bonds potentially leaving IG indices and being handed to a completely different marginal buyer. CoreWeave is showing the same repricing further down the chain: two CRWV bonds have now broken 13%, even with the equity around $88; the last time its credit crossed 13%, the stock was below $70 in June, suggesting creditors are deteriorating faster than equity this time. The important fracture in the AI stack is therefore occurring before anyone has had to decide whether OpenAI eventually generates enough cash to pay for all this compute. A pipeline route slips, an air permit moves, energisation shifts twelve months; Oracle delays $30B of hardware purchases; project debt falls into the 80s; the tenant’s supplier CDS widens; IG index eligibility becomes a live question; and a highly levered GPU lessor suddenly clears at 13%. The supposed credit enhancement was “contracted AI demand”; Jupiter is showing that a contract written against megawatts that do not yet exist can transmit construction risk all the way from a New Mexico gas pipeline into Oracle’s $120B bond complex and the financing cost of the GPUs that were meant to fill the building.