Microsoft Gradually Exits Oracle Cloud Computing Rental Agreement

According to Wall Street China and Bloomberg, news broke on Friday, November 6 (US Eastern Time) that Microsoft has begun shutting down part of the AI compute capacity it leases from Oracle over recent months and has decided not to renew the related contracts. People familiar with the matter said the capacity, provided on servers with an older generation of Nvidia chips, no longer meets Microsoft's technical specifications, so its value to Microsoft has declined. Word of the move drove Oracle's shares down sharply during Friday's US midday session, while so-called neocloud stocks that had rallied earlier gave back much of their gains, including a short sharp drop for CoreWeave. Oracle later rebounded to close higher, and neocloud providers also finished up. The previous day, Thursday, reports said that after committing more than $80 billion to rent capacity from other cloud companies, Microsoft had grown unhappy with the high costs and delivery delays at neocloud providers and was tightening its review of data center projects, pulling out of ones it deemed risky and discussing internally whether to hold off signing new agreements. Two days of reporting point to Microsoft rethinking its external compute purchasing strategy, with the wind-down still unfolding.