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Oracle, the American company, is facing financial and strategic challenges in its pursuit to become a major player in the field of artificial intelligence. It is spending around $250 billion to build specialized data centers, leading to expenditures that surpass its revenues and cash flows. This rapid expansion has resulted in a downgrade of its credit rating to BBB-, the lowest level for investment-grade securities, making it more difficult to finance its future plans due to the high yields on its bonds, which have reached approximately 6.4% over ten years. Despite continuing to spend record amounts, Oracle is encountering financial constraints due to rising borrowing costs and reduced flexibility compared to competitors like Google and Microsoft, who have greater cash reserves to support their AI investments. The company plans to raise about $40 billion through debt and equity to fund its ongoing expansion efforts, with expectations of a free cash flow shortfall exceeding $42 billion next year, posing a significant test of the sustainability of its massive AI investments.
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