ORACLE Declares "Force Majeure" on Data Center Build; Stock Drops 5%
Oracle stock, $ORCL fell -5% after declaring "force majeure" on a massive data center being built in New Mexico.
Oracle has reportedly made the move in order to shield itself from rapidly rising expenses on the project.
FLASHING RED SIGNAL FOR "AI"
Oracle is aggressively going all-in on artificial intelligence (AI), committing hundreds of billions of dollars to build massive, next-generation AI data centers and expand its Oracle Cloud Infrastructure (OCI).
Core Strategy & Scale
Massive Capital Investment: Spending tens of billions on advanced Nvidia GPUs and infrastructure.
Soaring Backlog: Remaining performance obligations (RPO) surged to $664 billion due to major cloud and AI contracts (such as with OpenAI).
Power and Energy: Secured over 10 gigawatts of total power capacity, investing heavily in clean energy and on-site generation.
Clean Energy Deals: Signed over 1.7 GW of clean energy contracts in Texas to match data center usage with carbon-free power.
Financial & Operational Risks
Elevated Debt: Accumulated substantial corporate debt (surpassing $110 billion) to finance rapid expansion.
Workforce Trade-offs: Redirecting capital heavily into steel, concrete, and chips while reducing corporate headcount globally.
Execution Pressure: Relying heavily on future enterprise AI consumption to convert massive backlogs into positive free cash flow by 2029
For a major player in AI and Data Centers to publicly declare "Force Majeure" is a gigantic flashing RED Signal indicating to many people that the hype around AI and the future of AI corporations, isn't as stable or reliable as it was presented to Investors.
