Amid growing concerns about a potential bubble in the artificial intelligence (AI) sector, tech giant Oracle has suffered a setback that could disrupt the company's development plans.
Blue Owl Capital , Oracle's largest data center partner, has decided to cancel a $10 billion investment earmarked for the development of a 1 gigawatt (GW) megadata center planned to serve OpenAI in Michigan.
The announcement sent the company's shares tumbling. On the NYSE, Oracle shares were down 6% around 5:40 PM (Brasilia time). Valued at US$510 billion, the company has accumulated a 6.5% increase in value by 2025.
The investor's decision is related to the software group's growing concerns about its increasing debt and AI spending. Blue Owl typically creates a special purpose entity (SPE) that owns the data center and leases it to Oracle.
The private equity firm has been the primary financier of Oracle's largest data center projects in the United States, using a model of investing directly in the project and then raising funds for construction.
The breakdown in financing negotiations with Blue Owl casts doubt on the entire financing of the Michigan unit, as Oracle has not yet reached an agreement with a new investor, according to people familiar with the matter.
Blackstone has held talks to join as a financial partner, but has not yet signed an agreement to invest in Oracle's data center, the sources said.
Turbulence in funding points to growing tensions in Oracle's AI infrastructure strategy. The group, founded by Larry Ellison, has embarked on a spending spree on AI data centers in recent months and has turned to debt markets to increase its capacity, spooking investors and generating concern among rating agencies and analysts.
Sources close to the deal said creditors pushed for tighter lease and debt terms amid shifting market sentiment toward massive AI spending.
This includes Oracle's own commitments and increasing debt levels. As a result, the deal proved less financially attractive to Blue Owl than its previous projects, according to some sources.
Blue Owl was also concerned about potential delays in the Michigan project, which is being built by developer Related Digital. Blackstone and Blue Owl declined to comment.
“Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this case was not Blue Owl. Final negotiations for the equity stake agreement are progressing according to schedule and as planned,” Oracle told the Financial Times .
Related Digital stated: “This is an exceptional project that has generated significant interest from investment partners. We evaluated all our options and selected our preferred investment partner based on their unparalleled experience in the field.”
The developer declined to disclose the name of the project's equity partner. A source close to the company stated that it is in the "final stages of due diligence " with the investor.
Oracle is building the data center in an agricultural area in Saline County as part of a $300 billion deal with OpenAI to provide 4.5 GW of computing power over the next five years.
The project has faced problems since its launch in August, including an initial veto by local authorities on approving a rezoning request to allow construction on the site, which resulted in a lawsuit.
The case was subsequently resolved, allowing construction to begin in the first quarter of next year.
A source familiar with Oracle's contract structure with lenders and data center operators told the Financial Times that the company faces tougher financing conditions than competitors like Amazon and Microsoft.
In November, Oracle had approximately $105 billion in net debt, including lease obligations, a 34.6% increase compared to the $78 billion recorded in the same period of the previous year.
The value will reach approximately US$290 billion by 2028. Oracle sold US$18 billion in bonds in September and is in negotiations to raise US$38 billion in debt financing through Americans.
