Microsoft has stopped renewing its AI compute rental contract with Oracle and
has been winding down rented capacity over recent months, people familiar with
the matter said. Oracle supplied servers using older-generation NVIDIA GPUs that
Microsoft says no longer meet its specifications. The parties struck the deal in
2023 to support the revamped Bing; financial terms were not disclosed. Oracle
said demand for its AI infrastructure remains strong and that older GPUs still
have a market. Microsoft is reassessing external AI compute partners and has
committed more than $80 billion of compute rentals to emerging providers
including CoreWeave, Nscale and Nebius. Microsoft executives have grown
increasingly frustrated with high supplier costs and delivery delays, tightening
data-center project reviews, exiting some higher-risk projects and reconsidering
new compute agreements. Oracle’s cloud is expanding rapidly but heavy capex has
pushed free cash flow negative, stoking investor concern over AI infrastructure
returns; shares fell as much as 4.6% intraday after the report and were about 3%
lower at the time of reporting after an earlier ~3.5% gain.
