SILICON VALLEY — Oracle, a major operator of large-scale computing infrastructure, has sent advance notice that it will delay data center rent payments, raising concerns across the industry. The data center Oracle plans to lease in New Mexico is expected to begin operations at least a year behind schedule because of local opposition to power facilities.
Morgan Stanley said the development has prompted a broad review of loans and lease agreements tied to artificial intelligence data centers, adding to the difficulties facing companies trying to raise funds for AI buildouts.
According to U.S. media reports on the 26th, Oracle recently sent a notice invoking a force majeure clause to Stack Infrastructure, the developer of the New Mexico data center known as Project Jupiter. Stack is a subsidiary of Blue Owl Capital, a private credit fund manager.
The force majeure clause essentially allows Oracle to push back the date when rent payments begin. Bloomberg reported that Oracle is seeking to delay payments if the data center fails to come online in March 2028 as planned. Foreign media outlets expect the project to be pushed back by at least a year.
OpenAI, the developer of ChatGPT, signed a five-year, $300 billion (about 407.7 trillion won) cloud computing services contract with Oracle a year ago. To provide computing capacity to OpenAI, Oracle has signed a series of data center lease agreements totaling 4.5 gigawatts across New Mexico, Texas, Wisconsin and Michigan. The latest development, however, could spill over to OpenAI.
In leasing the New Mexico facility, Oracle signed a hell-or-high-water contract requiring it to pay rent regardless of whether power was secured, meaning the company has effectively broken that commitment.
Securing power proved harder than Oracle expected. After plans to use gas turbines and diesel generators ran into local opposition, Oracle overhauled its approach but has yet to obtain an air pollution permit from the state government. It also hit an obstacle as part of a 17-mile natural gas pipeline route would cross state-owned land. In the process, Oracle removed BorderPlex Digital Assets, its key partner for the site and power supply, from the project, and Bloom Energy, which had planned to supply fuel cells to make use of natural gas, also faces a setback to its expected revenue.
An Oracle spokesperson stressed that a force majeure notice by itself does not mean a project delay or a change in delivery timelines. Contrary to Oracle's explanation, investors are watching with unease. The price of five-year credit default swaps, which gauge the risk of an Oracle default, rose to an all-time high of 231.77 as of the 25th. For the New Mexico facility, a consortium of about 20 banks provided $18 billion in construction financing, and Blue Owl funds invested about $3 billion in equity.
The Wall Street Journal reported that invoking the force majeure clause does not reduce the amount Oracle must ultimately pay, while Bloomberg estimated that debt tied to the project has already fallen below 90 cents on the dollar, a distressed level.
