Microsoft winds down Oracle AI capacity deal over older Nvidia chips

The arrangement began in 2023, when Oracle agreed to provide servers supporting Microsoft’s AI-powered Bing search engine. Microsoft has switched off rented capacity in recent months as its specifications changed, Bloomberg reported. The companies did not disclose the contract’s size, and Microsoft declined to comment on the decision.

Oracle said demand for its AI infrastructure remained strong, including for earlier-generation GPUs. In a Nov. 6 statement referring to its latest earnings call, the company said GPU capacity coming up for renewal in its fiscal first quarter was either renewed or resold under long-term contracts at prices 20% above previous agreements. Oracle said most of those GPUs were at least four years old. It did not identify the customers taking the capacity or say whether any had taken over Microsoft’s allocation.

Microsoft’s move comes amid a broader review of outside computing commitments. Bloomberg reported that the company had pledged more than $80 billion to rent capacity from providers including CoreWeave, Nscale and Nebius. Executives have raised concerns over suppliers’ costs and delivery delays, the publication said. Microsoft has tightened scrutiny of data center construction, pulled back from projects it considers risky and discussed whether to make further agreements with providers.

Microsoft told Reuters that its infrastructure strategy combines company-owned data centers, leased facilities and outside partnerships, giving it flexibility to bring capacity online reliably and efficiently. The company also declined an option to expand its existing Texas agreement with Nscale; Reuters reported that this did not affect the current contract or Nscale’s disclosed backlog.

The review comes as providers, including Bitcoin miners, invest in AI infrastructure. IREN said customer-requested network changes delayed its Microsoft deployment and shifted its target for more than $4 billion in annual recurring revenue from December to early 2027. Its AI cloud revenue reached $200 million in the September quarter, while Bitcoin mining revenue fell 58% from the previous quarter to $28 million. IREN shares closed nearly 17% lower on Nov. 5.

Oracle and Microsoft have other cloud ties. In June 2024, Oracle announced a partnership with Microsoft and OpenAI to provide additional capacity through Oracle Cloud Infrastructure, extending Azure AI to support OpenAI’s growth.