Will Oracle Stock Break Down Toward $150 as Bondholder Lawsuit Exposes AI Debt Risks?
After a brief pause following a brutal valuation reset, Oracle’s shares have come under renewed pressure as a bondholder lawsuit, rising...
Quick overview
- Oracle's shares are under pressure due to a bondholder lawsuit and rising debt concerns amid escalating AI infrastructure costs.
- A recent lawsuit alleges Oracle misled investors about its need for significant new borrowing related to its AI expansion, raising fears of reputational damage and higher financing costs.
- Despite strong revenue growth, Oracle's deteriorating cash flow and governance changes have heightened investor skepticism about its financial stability.
- The company's massive backlog of performance obligations and the need for capital-intensive investments further complicate its outlook in a challenging market.
Live ORCL Chart
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After a brief pause following a brutal valuation reset, Oracle’s shares have come under renewed pressure as a bondholder lawsuit, rising debt concerns, and escalating AI infrastructure costs cloud the outlook.
A Rebound That Quickly Lost Its Footing
Oracle entered the week attempting to stabilise after one of the sharpest repricings seen among large-cap technology stocks. Shares had begun to edge higher following weeks of heavy selling, raising cautious hopes that the worst of the reset might be over. That optimism proved short-lived. On Wednesday, Oracle stock fell another 4.5%, erasing recent gains and reinforcing the sense that the recovery lacks conviction.
The renewed weakness highlights a broader shift in investor psychology. Markets are no longer inclined to give Oracle the benefit of the doubt as it accelerates spending on artificial intelligence infrastructure. Instead, every development is being filtered through a more sceptical lens focused on leverage, cash flow, and disclosure.
Bondholder Lawsuit Reignites Investor Anxiety
The immediate catalyst for Wednesday’s selloff was a lawsuit filed by bondholders accusing Oracle of misleading disclosures related to its AI expansion. The proposed class action, led by the Ohio Carpenters’ Pension Plan and filed in New York state court, alleges that Oracle failed to adequately disclose its need for significant new borrowing.
According to the complaint, investors purchased roughly $18 billion in senior notes and bonds issued on September 25—just two weeks after Oracle announced a massive $300 billion, five-year agreement to supply OpenAI with computing capacity. Bondholders argue that Oracle downplayed the extent to which the deal would necessitate additional debt, exposing them to losses as credit risk increased.
For equity investors, the lawsuit strikes at a sensitive pressure point. Legal challenges tied to disclosure not only threaten reputational damage but also raise the risk of higher financing costs at a time when Oracle may need to access capital markets again.
Technical Signals Point to Ongoing Fragility
From a technical perspective, Oracle’s chart reflects the deterioration in sentiment. While the 20-period moving average on the monthly chart continues to offer temporary support, the broader structure remains fragile and there’s no willing to rebound off the 20 SMA (gray) after the fall, which points to further declines.
ORCL Chart Monthly – Can the 20 SMA Hold for Long?
On the daily chart the ORCL stock found support at the 200 SMA (purple) and we saw a rebound off this moving average. But the rebound was weak and the 50 SMA (yellow) acted as resistance, rejecting the price and now ORCL is testing the 200 daily MA again.
ORCL Chart Daily – The Highs Keep Getting Lower
A decisive break lower would refocus attention on deeper support zones near $150, with further downside risk toward the April lows around $118 if selling pressure accelerates. Failure to reclaim key resistance levels has reinforced bearish momentum, creating a self-reinforcing cycle of negative headlines and technical weakness.
Debt Becomes Central to the AI Debate
The case has sharpened an already uncomfortable question surrounding Oracle’s AI strategy: how much leverage is required to sustain it. Oracle is racing to narrow the gap with cloud leaders Amazon and Microsoft, a competition that demands relentless spending on data centres, power infrastructure, and specialised hardware.
Analysts have warned that this push could significantly inflate the company’s balance sheet. Morgan Stanley has previously suggested Oracle may need to raise as much as $70 billion in additional debt by 2026 to fund its ambitions. While management insists such investment is essential, investors are increasingly wary of the trade-off between growth and financial stability.
In an environment of elevated interest rates, the cost of servicing that debt looms large.
A Fragile Pause After a Violent Repricing
Oracle’s current predicament follows a dramatic collapse in valuation. As recently as early September, shares traded above $345, lifting the company’s market capitalisation toward $940 billion and fuelling comparisons with the most elite names in technology.
That narrative has since unravelled. Oracle’s market value has fallen to roughly $550 billion, wiping out hundreds of billions in shareholder wealth. The speed and scale of the decline underscore how abruptly sentiment has shifted. What once looked like a straightforward AI growth story is now viewed as a high-risk, capital-intensive transformation.
Governance Changes Add to Unease
Compounding investor concerns, Oracle recently disclosed governance changes via a Form 8-K filing. Long-standing board members George H. Conrades and Naomi O. Seligman stepped down after 18 and 20 years of service, respectively.
Although the company stressed that the departures were not linked to disagreements, the timing has unsettled the market. Board turnover during periods of strategic and financial strain often invites speculation about internal alignment and oversight—particularly when the company is embarking on one of the most expensive expansions in its history.
AI Cost Anxiety Spreads Beyond Oracle
Oracle’s troubles have reverberated beyond its own stock. The earnings fallout reignited broader concerns across technology markets, especially around the sustainability of AI infrastructure spending. Investors are increasingly questioning whether the buildout of data centres and compute capacity is running ahead of realistic returns.
This reassessment has weighed on the Nasdaq and other AI-exposed names, reinforcing the idea that the sector is entering a more demanding phase where balance sheets matter as much as growth narratives.
Temporary Relief From a TikTok Headline
One development briefly stemmed the selling pressure. Reports that Oracle could participate in a consortium acquiring TikTok’s U.S. operations provided a short-lived stabilising effect. Under the proposed structure, Oracle would partner with Silver Lake and MGX, focusing on data security, hosting, and algorithm oversight.
While strategically aligned with Oracle’s infrastructure capabilities, the deal remains subject to regulatory approval from China. Investors have treated the news cautiously, viewing it as a potential upside option rather than a dependable catalyst.
A Massive Backlog With Heavy Strings Attached
At the centre of Oracle’s long-term case is its enormous remaining performance obligations, which have ballooned to $523 billion. The backlog surged following large AI-related contracts with customers such as Meta and Nvidia, offering headline visibility into future revenue.
Yet markets are discounting this pipeline heavily. The concern is not demand, but execution and funding. Delivering on such commitments requires years of capital-intensive investment, tying Oracle even more tightly to a cycle where cash outflows arrive well before cash inflows.
Cash Flow Becomes the Decisive Metric
Operationally, Oracle continues to post solid top-line growth. Revenue rose 14% year-on-year to $16.05 billion, while net income nearly doubled. Cloud services and applications revenue jumped 34%, confirming strong demand.
However, these positives have been overshadowed by deteriorating cash generation. Free cash flow sank deeper into negative territory, exceeding a $13 billion deficit. For investors, this is the red flag that now dominates the discussion.
From AI Favourite to Market Skepticism
Oracle’s transformation from AI darling to market sceptic has been swift. Each attempted rebound has faded more quickly than the last, reflecting diminishing confidence in the company’s ability to balance ambition with discipline.
Unless Oracle can demonstrate clearer control over leverage, cash flow, and disclosure, the stock remains vulnerable. In today’s market, vision alone is no longer enough—and Oracle is learning that lesson the hard way.
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