Technology

Microsoft Ends Oracle AI Computing Deal Amid Hardware Obsolescence

By TOI Tech Desk

Microsoft is winding down an artificial‑intelligence computing partnership with Oracle Corp after deciding not to renew a 2023 agreement, Bloomberg reported, citing people familiar with the matter. The company has been gradually deactivating rented server capacity in recent months. The Oracle‑hosted machines used older generations of Nvidia chips that no longer match Microsoft’s current computing needs. The move underscores growing industry concerns about hardware obsolescence; Gartner warns that aggressive capital spending on AI infrastructure can lead to significant write‑downs as newer, more efficient chips hit the market.

The loss of capacity adds to existing challenges for Oracle. Large capital outlays on AI data‑center construction have pushed the company’s free cash flow into negative territory, leaving its credit rating just one level above junk status. Oracle’s stock has fallen more than 50 % since its June high. Neither company disclosed the total financial value of the contract when it was announced in 2023 to support Microsoft’s AI‑powered Bing search engine, and Bloomberg could not determine its full scale.

The wind‑down follows an earlier Business Insider report that separate negotiations to lease additional Oracle capacity broke down in June. Oracle shares fell roughly 3 % after the news. An Oracle spokesperson said that customer demand for its AI infrastructure remains robust, including for earlier‑generation hardware.

The non‑renewal comes as Microsoft reviews more than $80 billion in outside cloud‑computing commitments with providers such as CoreWeave, Nscale and Nebius Group. Company executives have grown increasingly dissatisfied with rising costs and operational delays across these third‑party agreements, Bloomberg reported. Microsoft recently passed on an option to expand an Nscale deployment in Texas, coming just weeks after it withdrew from a planned Nscale site in the UK. The Financial Times noted that a potential deal extension would have been worth tens of billions of dollars for Nscale. The companies struck a deal in 2025 for Nscale to deploy around 200,000 Nvidia AI chips under an expanded agreement with Microsoft across its data centers in Europe and the US. The development follows Microsoft’s withdrawal from a deal to anchor Nscale’s flagship data center project in Loughton, Essex, after power‑connection delays pushed its expected supply date into the 2030s.