Oracle (NASDAQ:ORCL) stock has slumped this year, and the situation may get worse as its flagship "Project Jupiter" faces substantial headwinds. It ended the week at $147.6, down 41% from the year-to-date high.
Project Jupiter Woes Are Continuing
Oracle stock has slumped this year, and its risks are escalating. One of its biggest challenges is Project Jupiter, the $165 billion data center campus in New Mexico, which is also part of the Stargate program. OpenAI is also a top partner for this project.
The challenge, however, is that the local community has opposed the project, leading to substantial delays. The state’s Supreme Court has already paused some parts of its permitting process because of its biodiversity issues.
Additionally, the project faced regulatory hurdles in terms of its power supply. Oracle reportedly faced regulatory concerns over the gas pipeline that the project needed. Its plan to switch to Bloom Energy (NASDAQ:BE) fuel cells has led to criticism from environmentalists, who argue that it will lead to pollution. It is also facing water usage issues in the state.
As a result, bankers who arranged part of the project’s financing are finding it hard to sell the debt. About $18 billion tied to this project has plunged into stressed territory and are being quoted at 89 to 91 cents on the dollar. In a healthy market, the debt should be quoted near par.
Investors, who are the typical buyers of this debt, are worried about Oracle’s creditworthiness and its soaring debt. For one, Oracle’s credit rating sits one notch above junk rating following a recent downgrade by S&P Global (NYSE:SPGI).
These concerns come after Larry Ellison, the company’s founder, abruptly ended a plan to sell shares worth $7.5 billion without explanation. Also, there are concerns about OpenAI’s massive cash burn at a time when competition in the AI space is rising.
Oracle Stock Has Underperformed the Market This Year
These developments come at a time when Oracle’s shares have continued to underperform the market this year. It has dropped by 25% this year, while top indices like the S&P 500 and Nasdaq 100 have jumped by double digits.
ORCL stock chart | Source: TradingView
On the positive side, the stock has formed a rising broadening wedge pattern, commonly known as a megaphone. In most cases, this pattern normally leads to a bullish continuation.
The stock is attempting to move above the Strong, Pivot, Reverse level of the Murrey Math Lines. Therefore, despite its challenges, there is a likelihood that the stock will rebound, potentially to the upper side of the wedge at $180. A move above that level will point to more gains towards $200.
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