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Investing.com — Oracle shares fell 4% Friday after Bloomberg reported that Microsoft is winding down an arrangement to rent AI computing capacity from the company, adding to investor concerns about the sustainability of AI infrastructure spending following Thursday’s sharp selloff in AI-related stocks.
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 decision reflects a broader reassessment of billions of dollars in cloud partnerships as Microsoft evaluates its computing needs.
The rented capacity became less useful over time because it no longer met Microsoft’s specifications, the people said. The Oracle hardware relied on older-generation chips from Nvidia, which may have limited its suitability for Microsoft’s evolving AI workloads.
Microsoft declined to comment. An Oracle spokesperson said demand for its AI infrastructure remains strong, including for earlier-generation graphics processing units (GPUs).
The agreement, announced in 2023, was part of Microsoft’s effort to secure additional computing power for a new AI-assisted version of its Bing search engine. The full value of the arrangement could not be determined, Bloomberg reported.
The deal was notable because it involved Microsoft renting servers from a major competitor at a time when demand for AI computing capacity was outstripping available supply. It offered an early illustration of the scramble among technology companies to secure the infrastructure needed to develop and deploy increasingly powerful AI models.
Oracle sought to counter concerns about the departure, pointing to continued demand for older-generation GPUs. The company said in September that it was renewing contracts for four-year-old GPUs at a 20% premium to their original deal prices.
The distinction could be important for investors trying to determine whether Microsoft’s decision signals weakening demand for Oracle’s infrastructure or simply reflects the rapid pace of technological change in AI computing.
The timing of the report is particularly unfavorable for Oracle. Investors are already on edge following Thursday’s broad technology selloff, which saw the Nasdaq Composite plunge 5.5% and the Philadelphia Semiconductor Index tumble 12%, its steepest decline since March 2020. The rout reflected growing concerns about AI infrastructure spending, data-center expansion and the valuations of companies benefiting from the investment boom.
