Oracle freakout exposes fragile data center boom

Oracle

25/09/2026 18:07

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own. Refiles to add chart.
By Stephen Gandel
NEW YORK, Sept 25 (Reuters Breakingviews) - A land dispute in southern New Mexico is threatening to unravel the investment thesis behind the artificial intelligence boom. Oracle ORCL.N this week said it may invoke an Act-of-God clause to delay payments to a 2028 data-center project expected to provide computing power to OpenAI. The project is backed by private lender Blue Owl OWL.N as well as roughly $20 billion of loans from banks including Goldman Sachs. If more tech giants waver on their commitments, forecasts that OpenAI, Anthropic and other AI pioneers could generate revenue of $400 billion by 2030 will look wildly optimistic.
The problems facing AI labs are conceptually no different from those confronting any startup, even if they are operating on a scale unprecedented in business history. OpenAI and Anthropic need to finance the factories that will produce their product. In this case, the factories are data centers, and the financing requirement is measured in the trillions of dollars. The labs themselves cannot fund that expansion without help. Technology giants including Alphabet GOOGL.O, Amazon AMZN.O, Microsoft MSFT.O and Oracle, have stepped in to solve the problem. These companies have been dubbed hyperscalers because they appear to be powering the AI infrastructure boom. Their other function is enabling access to cheap credit by underwriting long-term data center leases.
The details of the dispute between Oracle and Blue Owl are pedestrian and predictable. The Project Jupiter campus under construction by STACK Infrastructure, a Blue Owl portfolio company, is projected to require as much as 2.45 gigawatts of power, enough for nearly 2 million homes. Given the challenge of supplying such vast amounts of electricity to a relatively rural area, delays are hardly surprising. Nor is the prospect of Oracle refusing to pay for a server farm if it has not yet been switched on.
The problem is that the software giant's bid to limit its exposure appears to be causing lenders to rethink terms across the sector. Without an Oracle-backed lease, the project would not have obtained an investment-grade credit rating that enabled it to borrow at rates around 6% just a year ago. Higher financing costs of 8% or more would in turn require a bigger financial commitment from OpenAI and Anthropic, undermining the project's viability.
One contractual dispute is not a death knell for AI. But it suggests that the industry's biggest constraint is not insufficient demand or regulation prompted by the threat of rogue bots extinguishing humanity. It may simply be the cost and complexity of building the infrastructure needed to justify the sky-high expectations already embedded in AI valuations.
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CONTEXT NEWS
Oracle has issued a force majeure notice to a unit of Blue Owl Capital, the developer of the massive New Mexico data-center campus, citing potential delays in securing power for the project, a person familiar with the matter told Reuters on September 24.
The notice indicates that Oracle would try to delay or even back out of the project that has been hit by a number of delays that could prevent the facility from opening on schedule in 2028. Blue Owl, which has invested $3 billion in the project, and borrowed as much as $20 billion from Goldman Sachs and others, says that even if Oracle is able to delay lease payments, the software group would still be responsible to support the project and its financing costs.
Oracle shares fell 3.3% on September 24. They were trading at $138, down 0.8%, on the morning of September 25.

(Editing by Peter Thal Larsen; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on GANDEL/ stephen.gandel@thomsonreuters.com))