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Microsoft winds down its 2023 Oracle deal to rent AI cloud capacity
Bloomberg reports Microsoft is winding down a 2023 deal that rents AI compute from Oracle. The Oracle servers run older Nvidia chips.
Image: The Next Web
Why it mattersThe biggest buyer of AI compute is auditing its outside contracts. Rented capacity on older chips is losing its value.
Bloomberg reports that Microsoft is winding down its 2023 deal to rent AI cloud capacity from Oracle. Microsoft declined to renew the contract. The hardware is an older generation of Nvidia chips, which Bloomberg says no longer meets what Microsoft needs. Reuters and The Next Web both carry the Bloomberg details.
The 2023 contract gave Microsoft access to Oracle Cloud Infrastructure to run Bing's AI search. Financial terms were never disclosed. Bloomberg also reports that Microsoft is reassessing more than $80 billion in outside cloud contracts. Cost and delay frustrations at several providers are the reason.
What the market did
Oracle shares fell almost 3 percent in afternoon trading. Microsoft shares were little changed. The market read the deal ending as a signal. Rented AI capacity tied to older chips is losing its value.
Neither Microsoft nor Oracle gave a long statement. Bloomberg quotes an Oracle spokesperson saying demand for its AI infrastructure remains strong, including for earlier-generation GPUs. Microsoft did not respond to a request for comment.
The chip cycle is now the deal cycle
A team buying AI compute from someone else has a cleaner read on the market this week. The biggest buyer in it is auditing its outside bill. That bill is $80 billion in Bloomberg's number. It means the ceiling on how much AI compute is actually scarce has a visible top. A smaller buyer can quote that back to a cloud sales team.
Chip generation now decides whether a rental contract is worth renewing. The Bloomberg report says Microsoft walked away because the Oracle hardware stopped matching what Bing needed. Older H100 and A100 racks still work for inference. The premium price AI buyers paid on them in 2023 is going. A rental deal signed today runs across at least one new Nvidia release before it ends. The capacity you pay for in year one is slower and cheaper in year two. The unused hours still cost the same.
The story also reads as a note on Oracle. Its biggest named AI tenant in the 2023 sign-up class is walking away. Meta was the other. Oracle still has strong demand for that older tier, by its own account. Demand for the premium price it charged in 2023 is a separate question.
The Bloomberg piece is behind a paywall. Reuters and The Next Web carry the same facts. None of the three names a new home for the Bing workload. Microsoft runs its own data centres. It also buys from neoclouds. Both are options for a workload coming off a competitor's cloud. The one thing all three outlets agree on is the pattern: a two-year contract on older silicon is a riskier bet in 2026 than it looked in 2023.
Source
This item was written by an AI system from the linked source. Reveneau is responsible for what it publishes.
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