THE ESSENTIALS IN 30 SECONDS

  • Bloomberg reported on November 6 that Microsoft is not renewing a 2023 deal to rent Oracle AI servers used for Bing and has been switching the capacity off.
  • People familiar with the matter told Bloomberg the servers' older Nvidia chips no longer fit Microsoft's needs; the contract's full size is not known.
  • Oracle said demand for its AI infrastructure, including older GPUs, remains strong; its shares fell on the day of the report.

Microsoft is letting a 2023 agreement to rent AI computing capacity from Oracle run out, Bloomberg reported on Friday, November 6, citing people familiar with the matter. As relayed by The Next Web and MarketScale, Microsoft has chosen not to renew the contract and has been turning off the rented capacity in recent months. Microsoft declined to comment.

What the deal covered

The arrangement gave Microsoft access to Oracle servers to run its AI-powered Bing search engine. According to Bloomberg's sources, the hardware relies on older generations of Nvidia chips that no longer match Microsoft's specifications, which made the capacity less useful over time. Bloomberg was unable to establish how large the contract was, so the financial impact on either company is unclear.

Bloomberg framed the decision as part of a wider review by Microsoft of large capacity contracts with outside cloud providers. The company has committed more than $80 billion to rent compute from firms such as CoreWeave, Nscale and Nebius, and its leaders are frustrated by costs and delays, Bloomberg reported. The Next Web adds that Microsoft reportedly declined an option to expand an Nscale deal in Texas this week, weeks after withdrawing from an Nscale site in the UK. Microsoft told Reuters that its infrastructure approach mixes its own data centres, leased facilities and outside partners, according to MarketScale.

Oracle's response and the market reaction

Oracle replied on X that demand for its OCI AI infrastructure remains strong, including for earlier-generation GPUs. It added that GPU capacity due for renewal in its first quarter had been renewed or resold on long-term contracts at prices 20% above previous levels, a point it had made on its latest earnings call.

Investors reacted anyway. The Next Web put Oracle's decline at about 3%, while investingLive reported that the stock traded intraday at $111.35, roughly 7% below its session high, and touched its lowest level since February 2024.

Why it matters

The episode illustrates a risk analysts have flagged for AI infrastructure: hardware can lose value quickly as newer chips arrive. Gartner has warned that a large share of AI infrastructure spending could face write-downs for that reason, The Next Web reports. Whether Oracle can redeploy the returned capacity at the prices it describes is the open question.