Investors claim Oracle misled them over OpenAI deal

(CN) — A public pension fund from a Michigan suburb claims in a class action that tech giant Oracle company misled it and other investors ahead of a $25 billion public note offering linked to a $300 billion cloud deal with OpenAI.

The city of Sterling Heights’ Police & Fire Retirement System claims that Oracle and its staff failed to heed warning signs about OpenAI, the controversial artificial intelligence research company whose cloud computing commitments helped push Oracle’s artificial intelligence expansion forward.

“Oracle was required to disclose at the time of the February 2026 Note Offering that the customer primarily responsible for the staggering [remaining performance obligations] growth claimed in the registration statement — OpenAI — had missed its internal revenue and new user targets and that OpenAI’s own CFO had doubts raised about OpenAI’s ability to pay for cloud computing power such as that supplied by Oracle. The registration statement, however, contained no such disclosures,” the pension writes.

The pension filed its suit against Oracle, several of the company’s current and former executives and board members, and various investment banking firms involved in the underwriting and management of the February 2026 note and its registration statement.

“At the time of the filing of this complaint, the price of the notes sold in the February 2026 Note Offering have fallen significantly from their offering price, damaging plaintiff and the class,” the pension writes in the suit filed Wednesday in Davidson County, Tennessee, where Oracle has been in the process of relocating its corporate headquarters to for the last five years.

The pension fund says Oracle highlighted significant growth in its cloud business in the months leading up to the offering, with executives attributing this momentum to “big players” in the ongoing “AI revolution.”

It says Oracle informed investors that its remaining performance obligations had swelled to just over $523 billion — an increase from around $97 billion the previous year.

The pension claims the company alluded to a possible agreement with OpenAI before their $300 billion cloud deal was officially announced months later. According to the pension, the surge in RPOs was likely tied to just one customer: OpenAI.

The pension says at the time, OpenAI was not profitable and barely generated a sliver of the revenue needed to make its payments to Oracle, let alone its additional infrastructure commitments to various other counterparties.

The pension claims that to fulfill its commitments to OpenAI, Oracle had to increase its debt, forcing the company to incur tens of billions in new capital expenditures and enter into over $200 billion in long-term lease agreements.

Referencing a related Oracle earnings call, the pension says executives said they expected $50 billion in capital expenditures in 2026 to meet demand for AI-related services, and when investors expressed concerns, executives cited previous growth in RPOs.

“None of the defendants named herein made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the registration statement were true and without omission of any material fact and were not misleading,” the pension writes.

The pension argues that by leaving out these details, Oracle misrepresented its financial outlook in violation of the Securities Act because OpenAI accounted for most of the company’s reported future revenue gains, which executives often referenced.

The pension is asking for compensatory damages and to cancel the purchasing of the notes.

The Sterling Heights’ Police & Fire Retirement System did not immediately responded to a request for comment. The pension is represented by San Diego-based law firm Robbins Geller Rudman & Dowd.

Oracle declined to comment on the case.