AI bet goes awry: Oracle fires 21,000 employees | The Jerusalem Post
AI bet goes awry: Oracle fires 21,000 employees<br>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.
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Larry Ellison, Co-Founder and Chief Technology Officer of Oracle<br>(photo credit: GettyImages/Andrew Harnik)
ByWALLA! MONEY<br>JULY 23, 2026 15:35
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 data centers. This issue is not limited to Wisconsin: At least 24 US states have already approved special rates, minimum conditions, exit penalties, and collateral requirements for heavy electricity consumers.
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