TD Cowen Thinks Nvidia Is Helping Oracle Get Its Data Centers Financed
Oracle is burning through cash faster than it earns revenue, its credit rating sits one notch above junk, and a TD Cowen analyst now suspects its biggest chip supplier may be quietly backstopping the whole expansion.
On October 20, 2026, TD Cowen analyst Michael Elias wrote that Nvidia (NASDAQ:NVDA | NVDA Price Prediction) may be helping Oracle (NYSE:ORCL) secure lender funding for its AI data centers. Neither company has confirmed this, and the size of any support remains unquantified.
Oracle closed at $131.14, up 1.20%. Nvidia fell 0.29% to $216.47. Oracle’s small gain follows a 52.06% drop over the year. The stock is much cheaper, but the company may now be relying on its largest chip supplier to keep building.
Two Ways Nvidia Could Back Oracle’s Leases
Elias based his view on channel checks, which means conversations with people in the industry. He found that Nvidia may be giving Oracle “credit support” in one of two ways.
The first is a credit guarantee. Nvidia would stand behind Oracle’s lease payments, so data center owners still get paid if Oracle runs into trouble; the second is a sublease in which Nvidia would lease the buildings itself and then rent them to Oracle. In both cases, lenders would be counting on Nvidia’s stronger credit, which makes them more willing to fund construction.
Elias linked the agreement to Oracle’s reported five-year deal with Tencent. Under that deal, Tencent would lease about 100,000 advanced AI chips in Oracle data centers in Southeast Asia. The lease is estimated at about $7 billion, with roughly 30% paid upfront. That deal is still unconfirmed, and the countries involved have not been disclosed.
Oracle’s Cash Gap Explains Why It Would Want Help
Cloud infrastructure revenue grew 121% to $7.4 billion last quarter. But Oracle spent $28.5 billion on buildings and equipment, more than its total revenue of $19.3 billion, and free cash flow was negative $5.4 billion.
To keep building, Oracle sold $20 billion of stock during the quarter. It needs the capacity to deliver on $664 billion in remaining performance obligations, which is revenue customers have signed up for, but Oracle has not yet booked. S&P Global (NYSE:SPGI) cut Oracle to BBB-, its lowest investment-grade rating, in July. Back in January 2026, a separate TD Cowen report said lenders had roughly doubled the extra interest they charge Oracle for data center project loans.
Management has already said that some suppliers let Oracle pay for capacity as its own customers pay. Oracle also said it signed more than $30 billion of first-quarter contracts without putting in additional capital of its own.
Nvidia Has Already Described This Kind of Deal
On its August 26, 2026 earnings call, Nvidia described take-or-pay commitments. Under these, Nvidia pays for part of a facility’s capacity. It must pay whether or not it gets used, which gives lenders “the confidence to underwrite the project.” Colette Kress, who was chief financial officer on that call, added: “We’re not making loans.”
Nvidia has disclosed guarantee obligations capped at $108.5 billion. That call did not name Oracle as one of the companies receiving support, so TD Cowen’s view remains unconfirmed.
What Each Company Gains and Risks
Nvidia keeps demand for its chips strong. But it takes on the risk that a customer can’t pay, and that risk may not show up clearly on its balance sheet. On October 19, S&P warned that big tech companies may carry more AI-related obligations than they report. That adds to existing concerns about circular financing, where a supplier helps pay for purchases of its own products.
Oracle gets cheaper money to build with, but it becomes more dependent on Nvidia. For a company worth $397.4 billion, that is a reasonable price for keeping construction on schedule.
Oracle’s Valuation and Downgrade Risk Ahead of December Earnings
Oracle trades at about 18 times expected earnings, and analysts’ average price target is $249.11. If Nvidia’s support proves real, it would lower borrowing costs that helped drag the stock down.
The main risk is another downgrade. A cut below BBB- would put Oracle’s debt in the junk category, meaning below investment grade, and raise its borrowing costs across the board.
You can check this thesis against Oracle’s December earnings report. The bullish case has two requirements. Net cash capital spending, meaning spending after customer prepayments, must stay within Oracle’s guidance of not more than $70 billion for the year, and either company must confirm the support. The case breaks if free cash flow gets worse and no confirmation comes.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
