Microsoft is ending its 2023 deal to rent AI computing power from Oracle, according to Bloomberg. The company has been switching off the rented capacity in recent months after deciding not to renew the contract, with the servers running older Nvidia chips. Microsoft is reviewing more than $80B in contracts with outside cloud providers as it updates its AI infrastructure.
The Oracle deal supported Microsoft’s AI-powered Bing search, but the hardware no longer matched its needs. Gartner has warned that ageing AI infrastructure could lead to significant write-downs as newer chips become available. Attempts to expand Microsoft’s use of Oracle capacity collapsed in June, and further negotiations with other suppliers such as Nscale have also stalled.
Oracle faces increasing pressure as demand shifts. Its heavy spending on AI data centres has pushed free cash flow negative and left its credit rating just above junk. Microsoft’s decisions signal a focus on cost control and up-to-date technology, affecting suppliers’ revenue and market positions.
Senior executives in regulated sectors should monitor supplier stability and contract terms as cloud infrastructure needs evolve rapidly. The next moves by Microsoft and other large buyers could reshape the AI infrastructure market.
