Microsoft has begun winding down an agreement to rent AI computing capacity from Oracle after choosing not to renew a contract that relied on older Nvidia chips no longer meeting its requirements, Bloomberg reported on Nov. 6 and 7. The arrangement dates back to 2023, when Oracle agreed to supply servers supporting Microsoft’s AI-powered Bing search engine during a shortage of computing power.
Microsoft has been switching off rented Oracle capacity in recent months, according to people familiar with the matter. Oracle pushed back against demand concerns, saying GPU capacity that came up for renewal in its fiscal first quarter was either renewed or sold to other customers under long-term contracts at prices 20% above previous agreements. Oracle added that most of those GPUs were at least four years old, but demand for OCI's AI infrastructure remained strong, including for earlier-generation GPUs.
The pullback follows broader concerns inside Microsoft over supplier costs and delivery delays. Bloomberg said Microsoft has committed more than $80 billion to renting capacity from outside cloud providers, including CoreWeave, Nscale and Nebius. Microsoft has tightened oversight of data center construction, sent employees to supplier sites and declined an option to expand an existing Texas agreement with Nscale. Reuters reported that decision did not affect the current Nscale contract or its disclosed backlog.
The report also highlighted pressure on Bitcoin miner IREN, whose Microsoft deployment faced delays because of customer-requested network infrastructure changes. IREN moved its target for more than $4 billion in annual recurring revenue from December into early 2027. Its AI cloud revenue reached $200 million in the September quarter, while Bitcoin mining revenue fell 58% from the previous quarter to $28 million. IREN shares closed nearly 17% lower on Nov. 5.
The news landed amid a sharp tech selloff. The Nasdaq Composite dropped 5.5% on Thursday, while the Philadelphia Semiconductor Index fell 12%, its biggest daily loss since March 2020. Oracle shares dipped 4% on Friday as investors questioned how long the AI infrastructure boom can sustain itself.
