Shares of Oracle (ORCL 5.46%) are down 5.1% as of 2:31 p.m. ET today. The drop comes as the S&P 500 and Nasdaq Composite lost 1% and 1.5%, respectively.

Oracle has reportedly failed to secure financing from Blue Owl Capital to fund the construction of a new data center, extending a multi-day sell-off following last week's earnings.

Blue Owl walks away from $10 billion data center deal

Oracle will now have to look elsewhere to find the $10 billion it needs to fund the construction of a new data center in Michigan. Blue Owl has been a major partner in financing Oracle's artificial intelligence (AI) ambitions thus far, making the missed deal all the more concerning to investors, as it adds to the narrative that Oracle is a credit risk.

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Oracle's bonds are trading like junk

Oracle may now have a hard time securing financing from others -- at least on favorable terms -- given Blue Owl walked away from the deal. The company's bonds, despite retaining their investment-grade ratings, are trading at levels comparable to junk bonds. Credit default swaps (essentially insurance against a company defaulting on its debt) have reached highs not seen for Oracle since the great financial crisis.

Oracle is highly leveraged, relying on expensive debt to fund its rapid buildout of AI data centers. It's an extremely risky play that requires AI demand to continue growing at a lightning pace. I would not own the stock.