Oracle’s AI Bet Rattles Wall Street as Risks Mount

Oracle ( (ORCL) ) has fallen by -9.79%. Read on to learn why.

Oracle shares slid 9.79% over the past week as investors focused less on the company’s headline AI ambitions and more on the mounting costs behind them. A sharp move came after Morgan Stanley cut its price target on Oracle by 30% to $213, warning that the company’s aggressive buildout of AI cloud infrastructure could squeeze earnings and strain its balance sheet. The bank highlighted that, despite the recent sell-off, credit markets may still be underestimating Oracle’s higher funding and leverage needs.

Those concerns center on Oracle’s rapidly rising debt load, which has swelled from about $71 billion to roughly $105 billion over the last five years as it races to become a major AI infrastructure player. The company is also embroiled in a court battle with investors over an $18 billion bond sale linked to its AI push, adding another layer of uncertainty. Morgan Stanley’s analyst went so far as to recommend dumping Oracle’s benchmark bonds in favor of credit default swaps, effectively treating the name as riskier credit despite its blue-chip status.

Yet the bearish credit call stands in contrast to a still-optimistic equity story on Wall Street, creating a tug-of-war that helped fuel volatility in Oracle’s stock. Guggenheim reiterated its Buy rating and labeled Oracle a “decade stock,” arguing that patience could be rewarded with exponential earnings growth as AI and cloud spending ramp up. The broader analyst community remains positive, with a Strong/Moderate Buy consensus and average price targets suggesting significant upside from current levels, but the week’s 9.79% drop shows investors are no longer ignoring the cost and complexity of Oracle’s AI transformation—even as it secures high-profile roles in deals like TikTok’s new U.S.-led structure.