Microsoft ends cloud rental deal with Oracle as AI hardware needs shift

Microsoft is ending its arrangement to rent AI computing capacity from Oracle as part of a wider review of its cloud partnerships. Shares of both Microsoft and Oracle remained flat during afternoon trading after both stocks faced pressure this week due to market worries over tighter regulatory scrutiny. Microsoft chose not to renew its contract with Oracle and has been turning off this rented computing power over recent months. The Oracle hardware relied on an older generation of Nvidia chips, making the rented capacity less valuable over time as Microsoft's technology needs changed. An Oracle spokesperson stated that demand for its AI infrastructure remains strong, including for earlier-generation GPUs. Microsoft did not immediately reply to requests for comment from Reuters. This shift follows other signs that Microsoft is changing how it secures computing capacity to manage its massive AI spending. AI cloud company IREN delayed some infrastructure deliveries after Microsoft asked for changes to its network design, pushing back a major revenue capacity target to January or potentially late February. Bloomberg News also reported that Microsoft is tightening its oversight of data center projects run by neocloud providers like IREN, Nebius and Nscale due to rising costs and delays.

Context

Large technology companies spend billions of dollars on cloud partnerships and data centers to power growing artificial intelligence tools. These massive infrastructure investments require constant updates to newer hardware to keep up with fast-changing demands in the tech industry.