By Hamza Faisal
Microsoft is winding down an arrangement to rent artificial-intelligence computing capacity from Oracle, as the software giant reassesses billions of dollars in cloud partnerships, Bloomberg News reported on Friday.
Microsoft has been turning off rented computing capacity from Oracle in recent months after declining to renew the contract, according to people familiar with the matter cited by Bloomberg. The move is part of a broader review of how Microsoft secures the computing power behind its AI ambitions, as it looks to get more out of its enormous AI investments.
The arrangement dates back to 2023, when Oracle agreed to supply servers to support Microsoft's AI-powered Bing search engine. Bloomberg could not determine the full value of the contract, and Microsoft declined to comment on the report.
Older chips no longer fit the bill
Over time, the computing capacity Microsoft was renting became less useful because it no longer met the company's evolving needs, the report said. The Oracle hardware relied on an older generation of Nvidia chips, which limited its suitability for the AI workloads Microsoft is now running.
As Microsoft's AI models have grown larger and more demanding, the older hardware delivered less computing power for the electricity and money spent on it.
The decision is not a cut to Microsoft's AI spending. Rather, it reflects a shift in where and how the company buys computing capacity, favouring hardware and partners that match its current technical requirements.
Oracle pushes back as shares slide
Oracle shares fell nearly 3 percent in afternoon trading on Friday, after dropping as much as 4 percent earlier in the session. Microsoft shares were little changed. Both stocks have come under pressure this week after a Democratic sweep in the US midterm elections raised worries of tighter scrutiny of new data centres, which could threaten the AI industry's rapid expansion.
Oracle pushed back on the suggestion that demand for its cloud infrastructure is weakening. In a statement on Friday, the company said demand for its AI infrastructure remains strong, including for earlier-generation graphics processors. Oracle said capacity that came up for renewal in its fiscal first quarter was renewed or resold to other customers under long-term contracts at prices 20 percent above the previous agreements.
Microsoft is one of the biggest buyers of rented AI computing in the world. According to Bloomberg, the company has committed more than 80 billion dollars to renting capacity from outside cloud providers, including CoreWeave, Nscale and Nebius, to support its AI operations.
A wider rethink of rented AI capacity
The Oracle wind-down is not the only sign that Microsoft is rethinking its cloud arrangements. AI cloud company IREN said on Thursday that it had delayed some infrastructure deliveries after Microsoft requested changes to its network design. The move pushed back IREN's target for bringing more than 4 billion dollars in annualised revenue capacity online from the end of the year to January, with a possible further delay until late February.
Bloomberg also reported on November 5 that Microsoft had sent employees to supplier sites to check construction standards and compliance, another sign of the closer scrutiny it is applying to its data-centre partners.
Talks in June over a lease of roughly 3 billion dollars of Oracle capacity had already stalled over security and compliance requirements, including Oracle Cloud Infrastructure's lack of FedRAMP certification, according to separate reporting. The latest move suggests the two companies' cloud relationship is being narrowed rather than expanded, even as the wider race for AI computing power continues at full speed.
