Shares in tech giant Oracle (ORCL) slumped 5% today on reports that its largest data center partner, Blue Owl (OWL), had pulled the plug on backing a planned $10 billion facility in Michigan. Oracle later denied the claim.
Claim 70% Off TipRanks This Holiday Season
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential
Oracle Loses Backer
According to a report in the Financial Times, Blue Owl had been in discussions with lenders and Oracle about investing in the 1 gigawatt data center project in Saline Township, but negotiations stalled. The facility is intended to serve OpenAI.
The private capital group has previously been the primary financial backer for Oracle’s largest data center projects in the United States, typically owning the facilities and leasing them to Oracle.
As stated in the report, the breakdown in funding talks raises questions about the financing for the Michigan facility, as Oracle reportedly has not yet secured a new backer.
Blackstone (BX) is reportedly in discussions to potentially replace Blue Owl Capital as a financial partner for the data center, although no deal has been signed yet, according to the FT.
However, an Oracle spokesperson later told MT Newswires that the FT story was incorrect. “Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl. Final negotiations for their equity deal are moving forward on schedule and according to plan,” the spokesperson said.
Adding to Oracle’s Woes
Nevertheless, the report adds to investors and analysts’ concerns around Oracle’s investments in AI and its rising debt pile.
It has $248 billion in lease commitments for data centers and cloud capacity commitments over the next 15 to 19 years. That is up almost 148% as of August.
In September, Oracle raised $18 billion in new debt, according to an SEC filing. By the end of November, the company owed over $124 billion including operating lease liabilities.
Oracle has raised its capital spending plan by $15 billion this year. That increase has come alongside higher cash use and weaker-than-expected cloud sales last quarter.
As a result, its shares are down 10% over the last six months – see above.
What are the Best AI Stocks to Buy Now?
We have rounded up the best AI stocks to buy now using our TipRanks comparison tool.
