Microsoft Lets 2023 Oracle AI Cloud Deal Lapse Over Older Nvidia Chips

Microsoft has stopped renewing a 2023 contract with Oracle that originally supplied cloud capacity for AI features in Bing search, and has been switching off the rented servers in recent months because they run older Nvidia chips that no longer match its workloads, The Next Web reports. Oracle shares fell about 3% on the news and are now more than half below their June peak.

Oracle's position is that its iron is still wanted. The company "said demand for its AI infrastructure remains strong, including for older chips," while Microsoft declined to comment. Sitting behind that exchange is a worsening backdrop for Oracle: heavy AI data center spending has pushed its free cash flow negative, and its credit rating has been cut to one notch above junk.

The Oracle unwind is part of a broader Microsoft reassessment of outside capacity. The company has committed more than $80B to rent capacity from CoreWeave, Nscale and Nebius, and this week "reportedly turned down an option to expand a Nscale deal in Texas, weeks after pulling out of a Nscale site in the UK." Bloomberg could not determine the full size of the Oracle contract.

The chip-generation question is now the one lenders and operators are watching. Gartner has warned that "much AI infrastructure spending could face large write-downs as newer chips arrive," a risk that lands squarely on capacity built around prior-generation GPUs. It is the third Nvidia-flavored story we have tracked today, alongside TSMC weighing 3D DRAM for Nvidia and a congressional probe of chip exports; the silicon generation gap is quickly becoming the axis the whole AI infra market rotates on.