Microsoft is winding down a 2023 agreement to rent AI computing capacity from Oracle, declining to renew the contract and switching off the rented capacity over recent months, according to a report published Friday. The deal gave Microsoft access to Oracle servers to run its AI-powered Bing search. Oracle shares fell about 3% on the news.
The Oracle servers ran older Nvidia chips and no longer matched what Microsoft needed, according to the report. The full size of the contract was not disclosed. Microsoft declined to comment.
Oracle said demand for its AI infrastructure remains strong, including demand for older chips.
Key facts
- 01Microsoft declined to renew a 2023 deal that gave it Oracle servers to run AI-powered Bing search.
- 02The servers ran older Nvidia chips that no longer matched Microsoft's needs; the deal's full size was not disclosed.
- 03Oracle shares fell about 3% on the report and are down more than half from their June peak.
- 04Microsoft is reassessing more than $80B in contracts with outside cloud providers including CoreWeave, Nscale and Nebius.
The decision is part of a broader review. Microsoft is reassessing more than $80 billion in contracts with outside cloud providers, and its leaders have been frustrated by costs and delays, according to the report. The company has committed more than $80 billion to rent capacity from providers including CoreWeave, Nscale and Nebius.
Microsoft has trimmed several of those arrangements in recent weeks. This week it turned down an option to expand its Nscale deal in Texas, and weeks earlier it pulled out of an Nscale site in the UK.
The Oracle relationship had already narrowed. Separate talks for Microsoft to lease additional Oracle cloud capacity collapsed in June.
For Oracle, the loss of a Bing workload lands during a difficult stretch. Its shares have more than halved since a June peak, and heavy spending on AI data centers has pushed its free cash flow negative and its credit rating to one notch above junk.
The question of what older AI hardware is worth is not unique to Oracle. Gartner has warned that a large share of AI infrastructure spending could face write-downs as newer generations of chips arrive.
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