Oracle pulls the emergency brake on giant AI project

Oracle has sent an unusual message to its partner on one of the world's largest AI data center projects. The company is declaring so-called "force majeure," a legal term for circumstances beyond one's own control that delay an agreement. In practice, this means Oracle wants to protect itself from having to pay rent for a facility that is not yet ready.

The project is called Jupiter and is located in New Mexico in the US. It is meant to provide power and computing capacity to the AI company OpenAI as part of the larger initiative called Stargate, in which the Japanese company SoftBank is also involved. The facility is being built by the company Stack Infrastructure, which is owned by the investment firm Blue Owl Capital.

The reason for the delay is permit problems and a delayed gas pipeline that is meant to supply the data center with energy for power generation. Authorities have denied access to state land that the pipeline was supposed to run through, and a subsequent appeal was also rejected. This means the facility will in all likelihood not be ready until 2028, later than originally planned.

The message from Oracle has made investors nervous about the entire market for AI financing. About $18 billion (roughly DKK 120 billion) has been borrowed to build the Jupiter project, and these loans have now become riskier in investors' eyes. The price of insurance against Oracle being unable to pay its debt has also risen.

Oracle's stock fell 3.5 percent, and Blue Owl's stock fell 3.6 percent after the news came out. The case is interesting for ordinary Danes because it shows how vulnerable the rapidly growing market for AI data centers is. Large parts of the current AI boom are financed with loans, and if more projects are delayed like Jupiter, it could create uncertainty far beyond Oracle itself, including at banks and pension funds that have invested in this type of debt.

Over the past year, Oracle itself has spent far more money on data centers than the company has earned, and has had negative cash flow for the fifth quarter in a row. That puts further pressure on the company to get its large AI bets under control.