Even if there are no defaults, a rise in AI construction may encounter financing constraints, since funds used on one project must be made available before they can be allocated to the next. Investment decisions should take into account the time it takes for this to occur.
The Financial Times stated on September 18 that the loans associated with the $18 billion Project Jupiter—this is the project which finances a data center leased to Oracle—were being privately quoted at around 89 to 91 cents on the dollar due to difficulties in selling the debt. It should be noted that these are merely the quoted figures, not actual sales. (Financial Times reporting.)
The fact that a quote is near 90 doesn’t imply that there has been a default, that there is a 10 percent chance of default, or that there has actually been a 10 percent loss on the financing; the price may be affected by interest rates, liquidity, credit concerns, and the discounts had to be offered in order to attract buyers.
People ought to inquire into the length of time the financing remains with the institutions that agreed to it, and how this influences their readiness to take on new deals.
Capital has a holding period
A bank or arranger which decides to finance a project with a view to selling the loan to other investors does so by assuming risk while it holds the loan. In some instances the commitment is made before any money has in fact been lent, and in other cases the arranger keeps a portion of the loan as good. Regardless of the situation, if the period of exposure extends beyond what is expected, it may use up the bank’s lending limits and funding resources.
Let us look at a simple example intended to be as straightforward as possible. A lender commits $1 billion to holding the loans before selling them; there is enough eligible demand, capacity remains fully utilized, each sale frees up the full amount, and the risk per dollar remains the same.
When calculating throughput, multiply $1 billion by 365 days and then divide by the holding period; if the holding period is doubled, the number of loans processed each year is halved, yet all of the loans can still be paid on time.
It has a fixed and dedicated capacity. Real institutions have the possibility of raising capital, altering their limits, hedging their exposures or agreeing to a lower sale price. It does not constitute a regulatory capital calculation nor does it assert that Jupiter has halved any bank’s lending capacity.
This model is intended to illustrate a potential limitation that default forecasts may overlook. If the earlier commitments take longer to be distributed, the market could end up funding fewer new projects. Developers might encounter this limit in the form of smaller loan commitments, higher interest rates, greater equity requirements, or later closing dates.
Construction and financing run on different clocks
There is also a timeline concerning the physical delivery of a project. The timing of when it can begin serving customers is determined by factors such as obtaining permits, securing a fuel supply, acquiring equipment, and the commissioning process. A delay in construction does not necessarily mean the loan distribution will be delayed by the same amount of time, but it may make lenders more cautious or lead them to request different terms.
The condition set out in Oracle’s 8 September announcement regarding its expected commitments to the Jupiter community and the economic benefits was that the air permit and the pipeline be approved as originally planned. This condition has a specific scope and should not be interpreted as applying to all of Oracle’s obligations. Oracle announcement.
Even for equity investors, importance should be attached to timing even if demand remains strong, since a project may eventually function as intended but could still end up being considerably less valuable than expected if it is delayed.
Here’s another example: A project requires an immediate investment of $1 billion. The present value of the future net operating cash flows is $1.1 billion when a 10 percent annual discount rate is applied. Therefore, the net present value of the project is $100 million.
If you delay all the operating cash flows by seven months but leave the original outlay unchanged, the present value of the cash flows will be about $1.041 billion; that is, $1.1 billion divided by 1.10 raised to the power of 7/12. As a result, the project’s net present value then drops to approximately $41 million.
The operating cash flow’s value decreases by only 5.4 percent, but the excess value over the original investment declines by about 59.5 percent. Indeed, a small change in the total value is enough to eliminate most of the meager investment buffer.
It is not a valuation of Project Jupiter, nor is it a prediction of equity returns; it assumes that all operating cash flows are merely postponed and fails to account for any additional financing costs, penalties, lost contract years, or the possibility of delaying construction spending. The key issue is that value creation is highly sensitive to timing when the initial cushion is small.
The same delay can hurt one asset and help another
An investor who assumes all AI infrastructure will be affected in the same way might overlook a key issue. When demand remains strong but new supply is delayed, the current operational capacity may become more valuable. A data centre that is already running and has paying customers has to deal with different problems than land which still requires permits, power and financing.
There is therefore a need to compare assets on the basis of their remaining delivery risks. Simply looking at announced capacity is an inadequate basis for such a comparison, and so is a backlog figure without details on the spending and milestones required to convert it into cash.
Evidence shows that a financing problem does not mean the entire construction program has come to a halt. In the first quarter of fiscal 2027, Oracle announced that it had delivered an additional 850 megawatts of data center capacity; however, this figure represents the company's total and does not confirm that Project Jupiter is operational. Oracle quarterly results.
Investors have to be able to distinguish between assets that are already in operation, projects that can be carried out, and commitments that may or may not result in revenue.A company could have all three kinds.
What would change our view
Once financing has been completed, we will examine the actual terms. In the case where the loans are fully distributed, the banks will have less exposure and, as a result, new arrangements can close without terms having to be much worse, weakening the case for a capacity constraint. Discounted sales can also be of help—by accepting a loss or lower profit, it is possible to free up capacity for new commitments.
We should also consider who is financing the delay. Although customer prepayments, extra sponsor equity, and construction contingencies can absorb this pressure, the costs involved and the contractual obligations remain important. Shifting the funding responsibility does not mean it is automatically removed from the economic system.
The questions which are most useful to managers are concrete; for example, how much of the committed financing still needs to be distributed? What approvals lie between the current spending and the first customer payment? How much spending could be affected if delivery is moved? And what effect would a six-month delay have on the return?
A good answer would link these questions to cash commitments and project milestones. Until that happens, the fact that there are no defaults does not say much about how fast new construction is moving. The AI build can slow down even if all borrowers keep paying their bills.