Blue Owl Capital withdraws support over disagreement on loan terms
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Oracle’s share price fell sharply after a Financial Times report revealed that Blue Owl Capital, a key financial partner, had withdrawn its support for a 10 billion dollar (around €8.5 billion) data centre project in Michigan. Oracle’s stock closed down 5.4% after the news broke.
Blue Owl was in advanced talks with Oracle and other lenders to invest in the 1 gigawatt facility, but ultimately decided not to proceed due to disagreements over the loan terms. The news sent shockwaves through Wall Street, as Blue Owl has played a crucial role over the past two years in financing Oracle’s ambitious data centre expansion. Blue Owl typically builds and owns these facilities before leasing them back to Oracle.
The development has raised concerns among investors, who are already wary of a potential bubble in the artificial intelligence (AI) sector, leading to a 1.8% decline in the tech-heavy Nasdaq index. Oracle sought to allay those fears, stating that the final negotiations over the data center financing were proceeding as planned and that its development plans remained intact.
The company confirmed Blue Owl’s withdrawal but stressed that an alternative financing partner has been selected from a group of interested investors. Oracle intends to use the Michigan facility to bolster its cloud computing capacity so it can host AI workloads and compete more effectively with rivals such as Amazon Web Services, Google and Microsoft.
OpenAI Group, a major customer that is expected to benefit from the facility, has previously identified Oracle as a key partner in its ambitious 500 billion dollar (around 426.5 billion euro) Stargate data center initiative.
The market reaction reflects broader concerns, not only about the AI market but specifically about Oracle’s strategy. The company has taken on billions of dollars in debt and significantly increased its capital expenditures this year to support the development of AI infrastructure. These aggressive outlays are under intense scrutiny, with many investors worried that Oracle’s future depends too heavily on the success of OpenAI.
OpenAI, currently valued at about 500 billion dollars (around €426.5 billion), is incurring substantial annual losses and has no clear path to profitability. The company’s ambitious plans to build a data center infrastructure worth more than $1 trillion (around €853.1 billion) by the end of the decade remain undefined in terms of financing.
This uncertainty has contributed to a nearly 40% drop in Oracle’s share price since mid-September, wiping out most of the gains from earlier this year, when the company secured nearly $455 billion (around €388.1 billion) in cloud services orders, mainly from OpenAI.
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