Oracle shares fell 4% on Friday after Bloomberg reported that Microsoft is winding down an arrangement to rent AI computing capacity from the company. Oracle says demand for its AI infrastructure remains strong. The report landed a day after a sharp selloff in AI-related stocks.
Oracle shares fell 4% Friday after Bloomberg reported that Microsoft is winding down a deal to rent AI computing capacity from the company. The news fed investor concerns about the sustainability of AI infrastructure spending.
Microsoft lets the contract lapse
Microsoft has been turning off computing capacity rented from Oracle in recent months after declining to renew the contract, according to people familiar with the matter cited by Bloomberg. The capacity became less useful over time because it no longer met Microsoft's specifications, those people said.
The Oracle hardware relied on older-generation Nvidia chips, which may have limited its suitability for Microsoft's evolving AI workloads. Microsoft declined to comment.
Oracle points to demand for older GPUs
An Oracle spokesperson said demand for its AI infrastructure remains strong, including for earlier-generation graphics processing units. The company said in September that it was renewing contracts for four-year-old GPUs at a 20% premium to their original deal prices.
That distinction could be important for investors weighing whether Microsoft's move signals weaker demand for Oracle's infrastructure or simply the rapid pace of change in AI computing.
A selloff sets the backdrop
The timing is awkward for Oracle. On Thursday the Nasdaq Composite plunged 5.5%, while the Philadelphia Semiconductor Index tumbled 12%, its steepest decline since March 2020.
Microsoft's arrangement was announced in 2023, when it was part of Microsoft's effort to secure computing power for a new AI-assisted version of Bing. Separately, Crypto Briefing cited a June Business Insider report on a lease worth more than $3 billion in Oracle Cloud Infrastructure capacity that fell apart, which Oracle called inaccurate.
Sources: Investing.com, Crypto Briefing
Trading involves risk.
Risk Disclaimer
