oracle The stock fell about 5% on Wednesday following a report that it had discussions with Blue Owl Capital Funding for a $10 billion data center in Michigan had stalled, although the cloud company later denied the report.
Blue Owl had been in discussions with Oracle about financing a 1 gigawatt plant OpenAI in Saline Township, Michigan, according to the Financial Times.
However, the plans fell through due to concerns about Oracle’s rising and extensive debt artificial intelligence expenses, the Financial Times reported, citing people familiar with the matter.
It seems that way to some investors raise red flags about the financing behind the rush to build more and more data centers.
The concern is that some hyperscalers are turning to private equity markets rather than financing the buildings themselves and entering into leases that could prove risky.
Other AI names also fell on Wednesday Broadcom decreased by 5%, Nvidia decreased by 3%, AMD decreased by 4% and CoreWeave decreases by 5%.
Blue Owl considered the project but pulled out because of unfavorable debt terms and the structure of repayments, according to a person familiar with the company’s plans who did not want to be identified discussing a confidential matter.
Blue Owl is involved in two other Oracle locations, the person said.
The person added that Blue Owl was also concerned that local politics in Michigan would cause delays in construction.
Oracle later responded to the FT report, saying the project was moving forward and Blue Owl was not part of equity discussions.
“Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this case was not Blue Owl. Final negotiations for their equity agreement are progressing as planned and on schedule,” Oracle spokesman Michael Egbert said in a statement.
The cloud company did not name the company involved in the current capital negotiations for the project.
“The idea that Blue Owl left is clearly false,” Ravitz said. “This is an extraordinary project that has generated great interest from equity partners,” Related Digital spokesperson Natalie Ravitz told CNBC.
Ravitz said the equity partner working on the project has “unparalleled expertise in this area,” but did not name the company.
The site, which is expected to begin construction in the first quarter of next year, is currently in the preconstruction phase with “strong support” from Michigan Gov. Gretchen Whitmer, she added.
CNBC has contacted the FT for comment.
The FT said Blackstone is in discussions about potentially replacing Blue Owl Capital as the financial partner for the data center, although no contract has been signed yet.
According to the FT, Blue Owl Capital was the lead investor in Oracle’s data center projects in the US, including a $15 billion center in Abilene, Texas, and an $18 billion site in New Mexico.
“This appears to be a case where the deal simply wasn’t the right one, and sophisticated investors understand that success does not require winning every transaction,” Evercore ISI analysts wrote in a note on Wednesday.
The bank added that digital infrastructure remains a “core growth vertical” for Blue Owl, noting that it plans to launch a digital infrastructure fund in 2026 that will complement this fund $7 billion fund announced in May.
Oracle has $248 billion in data center and cloud capacity leasing commitments over the next 15 to 19 years as of Nov. 30, the company said in its statement latest quarterly filing. That’s almost 148% more than in August.
In September, the cloud computing giant increased 18 billion dollars into new debt, according to an SEC filing. That same month, OpenAI announced a $300 billion partnership with Oracle over the next five years.
The company is open until the end of November owed over $124 billionincluding operating lease liabilities, the filing said.
Oracle shares are down about 50% from the peak of $345.72 reached in September.
Read the full FT story Here.
Oracle stock chart for the current year.
