Oracle Faces Mounting Investor Skepticism Over Debt-Fueled AI Push

Oracle Corporation finds itself navigating a storm of investor doubt, with its aggressive, debt-financed expansion into artificial intelligence now clouded by legal challenges and operational headwinds. The company's shares are under significant pressure, reflecting a crisis of confidence in its financial strategy.

A clear indicator of the growing unease is the dramatic spike in Oracle's perceived credit risk. The cost to insure against a default on the company's debt, known as Credit Default Swaps (CDS), has surged to 155.27 basis points. This level represents the highest point since the 2009 global financial crisis, underscoring a stark market reassessment of the tech giant's financial health.

This nervous sentiment has been triggered by a lawsuit from bondholders. The legal action alleges that Oracle's management withheld critical information during an $18 billion bond issuance. Specifically, the plaintiffs claim they were not informed that the company planned to seek an additional $38 billion in loans just seven weeks later to fund the construction of AI data centers. Investors argue they were misled about the true scale of Oracle's intended borrowing.

Should investors sell immediately? Or is it worth buying Oracle?

Operational Stumbles Compound Financial Strain

Oracle's ambitious AI strategy has loaded its balance sheet with approximately $108 billion in debt. This substantial financial burden is now meeting tangible operational obstacles, further weighing on the company's outlook:

• Construction Delays: After missing revenue targets, Oracle has been forced to acknowledge that key data center projects will be completed later than initially scheduled.
• Partner Withdrawal: Blue Owl Capital, a crucial infrastructure partner, has withdrawn its support for a planned $10 billion project.
• Share Price Decline: The cumulative impact of these developments has driven Oracle's stock price down significantly from its peak. Currently trading at $193.61, the shares sit roughly 31% below their 52-week high from September 2025.

A Glimmer of Hope Amid the Gloom

Despite the prevailing pessimism, a recent contract win offers a counterpoint. The UK's Ministry of Defence has signed a new cloud agreement to migrate its legacy systems to Oracle Cloud Infrastructure (OCI). This deal highlights the theoretical revenue potential embedded in Oracle's massive $523 billion backlog of orders.

However, analysts note that only a fraction of this backlog will convert to revenue in the near term. The immediate financial pressure from the company's debt load remains a dominant concern, complicating any potential for a swift recovery in its market valuation. The path forward requires Oracle to successfully execute its capital-intensive build-out while managing the legal and investor relations fallout from its financing decisions.