Oracle’s Debt-Fueled AI Gamble Sparks Investor Anxiety

A crisis of confidence is brewing around software titan Oracle, as its aggressive pursuit of artificial intelligence dominance triggers alarm bells on Wall Street. The company's stock has plummeted approximately 30% from its peak, marking its most severe monthly decline since 2011. The initial excitement around its AI initiatives from September has rapidly transformed into deep concern over the financial implications of its ambitious strategy.

The primary catalyst for the recent sell-off emerged from reports detailing Oracle's plans to secure an additional $38 billion in debt. This substantial capital raise is intended to fund the massive expansion of its AI infrastructure. However, this move places the company under intense scrutiny, as it comes atop an already significant total debt load of $104 billion. This existing liability includes $18 billion in corporate bonds.

The bond market reacted swiftly to the news. Oracle's corporate debt instruments came under significant pressure, with yields on bonds maturing in 2033 jumping more than three basis points within a two-week period. For newer bonds with a 2032 maturity, yields increased by nearly two basis points in just one week.

Stu Novick, a technology analyst at credit research firm Gimme Credit, encapsulated market sentiment, stating, "The numbers are enormous, and many people are asking: How do they even make money doing this?" The core issue is that Oracle's current operational expenditures are surpassing its operational income, representing a high-stakes wager that future profits from contracts with AI startups like OpenAI will materialize.

Ambitious Revenue Targets Face Scrutiny

Oracle has positioned itself as a key player in the AI boom, having invested billions into cloud and AI infrastructure throughout 2025. Its most prominent agreement is a reported $30 billion "Stargate" contract with OpenAI. The company's vision projects that its cloud infrastructure revenue will explode from $18 billion to $166 billion by the 2030 fiscal year—a more than nine-fold increase.

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

This ambitious projection is increasingly being questioned by market experts. Andrew Keches of Barclays downgraded Oracle's credit rating, explicitly noting, "We see no path for Oracle's credit profile to improve." The prevailing concern is that the company may fail to generate sufficient returns from its colossal AI investments to justify the immense debt burden it is accumulating.

Leadership Reshuffle Amid Strategic Pivot

This period of financial turbulence coincided with a significant leadership transition in September. Clay Magouyrk and Mike Sicilia were appointed as co-CEOs, while longtime CEO Safra Catz moved into the role of Executive Vice Chair. In a parallel development, founder Larry Ellison has intensified his direct oversight; the 81-year-old executive now supervises approximately 64,000 employees, representing about 40% of Oracle's total workforce.

Despite the prevailing headwinds, some analysts maintain a positive outlook. Siti Panigrahi of Mizuho Securities continues to uphold a "buy" recommendation with a price target of $400, suggesting a potential upside of roughly 75% from current levels. Conversely, other observers, including prominent investor Michael Burry, have voiced concerns regarding the accounting practices for depreciation on AI infrastructure.

December Quarterly Report: A Critical Test

All eyes are now on Oracle's upcoming quarterly earnings report, scheduled for mid-December. This disclosure will serve as a crucial indicator, revealing whether the company's debt-financed expansion is beginning to yield tangible results or if investor doubts will continue to intensify.