Oracle Faces Lawsuit after Surprise AI Debt Spooks Bond Market

Holders say undisclosed borrowing for AI infrastructure raised risks and sank prices.

Oracle Corp. is being sued by a group of bondholders who allege the company misled investors about its borrowing plans tied to a giant AI data center setup connected to its 300 billion dollar infrastructure agreement with OpenAI.

The Ohio Carpenters' Pension Plan and other holders of around eighteen billion dollars in Oracle notes issued in September 2025 filed the proposed collective legal action in Manhattan state court on Wednesday. The plaintiffs state that although Oracle mentioned in its bond offering paperwork that it "may" need to borrow extra funds, it did not reveal that it was already preparing a much larger financing move.

Oracle returned to the capital markets just seven weeks after the September bond issue, obtaining new loans totaling almost $38 billion to finance two data centers in Texas and Wisconsin to fulfill its AI promises. Bondholders’ state that this unanticipated extra debt raised Oracle's credit risk, which caused prices to decline and paper losses when investors reevaluated the company's debt profile.

According to the lawsuit, "the bond market's reaction to Oracle's additional debt was swift and bracing." The plaintiffs contend that they would have found better rates or reevaluated their investments if they had been aware of the upcoming major debt raising.

The lawsuit alleges violations of the federal Securities Act of 1933 and seeks unspecified damages against Oracle as well as a number of executives, including Chairman Larry Ellison, former CEO Safra Catz, and Chief Accounting Officer Maria Smith, as well as sixteen underwriting banks.

The legal action comes amid broader scrutiny of big tech’s financing strategies in the race to build AI infrastructure. Oracle’s stock reportedly dipped following news of the lawsuit, reflecting investor concern over its growing debt load.

Regarding the lawsuit, Oracle declined to comment. The case emphasizes the financial burden and disclosure issues associated with large-scale AI projects, especially when companies are up against wealthy competitors like Microsoft and Amazon.