AI bet goes awry: Oracle fires 21,000 employees

Oracle laid off ~13% of its staff to fund a $300B computing deal with
OpenAI. Now, a credit downgrade and $7B in required power grid
guarantees put the massive project in jeopardy. 

The global race for dominance in artificial intelligence is turning into
one of the most expensive and turbulent corporate competitions in
history. Tech giants Amazon, Microsoft, Alphabet, and Meta are expected
to spend about $600 billion on AI infrastructure during 2026. This
unprecedented spending spree is eroding cash flows and placing heavy
pressure on companies to prove that massive investments in chips,
servers, and data centers will ultimately yield profits. Yet alongside
the grand promises, the operational and human toll is beginning to
mount. 

One company that took one of the industry's biggest bets is Oracle. The
software giant became a primary provider of AI computing power after
signing a massive $300 billion contract with OpenAI. However,
constructing the data centers required to fulfill the agreement caused a
severe cash squeeze. To fund the rapid expansion, Oracle took aggressive
efficiency measures and enacted a sweeping wave of layoffs. By the end
of fiscal year 2026, the company's workforce was slashed by about 21,000
employees – a decline of roughly 13% – from 162,000 to 141,000 workers.
The deep cuts followed an operational restructuring driven in part by
the internal adoption of AI technologies. 

Now it appears that the complex financial situation in which Oracle
finds itself is endangering one of its flagship projects. The company is
involved in planning a massive, nearly one-gigawatt data center in Port
Washington, Wisconsin, meant to supply computing power for the OpenAI
contract. However, the Public Service Commission of Wisconsin refused to
ease financial collateral requirements, which are designed to ensure
that private electricity consumers are not forced to absorb costs in the
event of the facility's failure or closure. 

Under local regulations for large consumers, a data center operator
whose S&P credit rating drops below A- is required to provide collateral
covering the electrical infrastructure built for it. When the
requirements were reviewed, Oracle's rating stood at BBB and was
subsequently downgraded to BBB-. The rating agency attributed the
downgrade to heavy AI spending and uncertainty regarding the ability to
generate profits from it. As a result, Oracle is now required to provide
cash collateral or a letter of credit in the astronomical sum of over $7
billion just to connect the building to the power grid – a setup whose
ongoing maintenance will cost the company more than $100 million
annually. 

Oracle petitioned the court against the requirement, arguing that these
financing costs would deter future investment in the state, while
emphasizing its commitment to the project, which carries an estimated
value of about $15 billion. Regulators, on the other hand, remained firm
in their stance, clarifying that existing customers should not subsidize
states have already approved special rates, minimum conditions, exit
penalties, and collateral requirements for heavy electricity consumers. 

https://www.jpost.com/business-and-innovation/tech-and-start-ups/article-
903442