Oracle Faces Class Action Lawsuit and Analyst Downgrades
Oracle Corporation (NYSE: ORCL) is facing a class action lawsuit filed on January 14 by bondholders in Manhattan, who allege the company misled investors about its debt obligations related to a future AI infrastructure buildout. The lawsuit arises from securities sold in September 2025 amounting to $18 billion. The bondholders claim Oracle failed to disclose its need for an additional $38 billion in loans just weeks after the bond sale, leading to a spike in yields and falling bond prices.
In response to growing market concerns, Wall Street analysts have significantly downgraded Oracle’s stock, with UBS cutting its price target from $325 to $280, and RBC reducing theirs from $250 to $195. The most drastic cut came from Morgan Stanley, who decreased its target from $320 to $213, citing expectations of Oracle’s cumulative capital expenditures exceeding $275 billion through fiscal 2028, potentially pushing total debt above $400 billion.
These developments follow a broader trend of declining confidence in technology stocks amid increasing capital expenditures in AI, exemplified by Microsoft’s reported $37.5 billion in AI-related spending this quarter. Oracle’s stock has already fallen 15.6% in January, heightening investor uncertainty.
