Oracle has notified its development partner, Stack Infrastructure, of a potential delay in full rent payments for Project Jupiter, a 1,400-acre data center campus in New Mexico. This move, first reported by Bloomberg, cites force majeure due to setbacks, allowing Oracle to defer payments for up to three years if the project extends beyond 2028.
The project already faces a one-year delay due to power supply challenges, according to Reuters. Local opposition forced the development team to abandon plans for gas turbines and diesel generators, as reported by The Wall Street Journal.
Debt Concerns Grow Amid AI Data Center Expansion
Oracle and Blue Owl Capital, Stack Infrastructure’s parent company, have downplayed the notice, stating it reflects standard practice and doesn’t alter their long-term commitment. However, the delay intensifies concerns about the viability of massive data center projects fueling Big Tech’s AI ambitions.
The financial stakes are high. Blue Owl invested $3 billion in equity and secured an $18 billion debt commitment for Project Jupiter. Portions of this debt have traded below 90 cents on the dollar, indicating a potential $1.8 billion paper loss, as reported by the WSJ.
This development coincides with growing scrutiny of Oracle’s debt exposure in its data center pipeline, particularly compared to other Big Tech firms. The company’s heavy reliance on OpenAI has also raised eyebrows. In March, Oracle and OpenAI scrapped plans for a Texas expansion, and OpenAI reportedly paused a UK project and abandoned one in Norway.
Market Jitters and Expert Warnings
The news sent Oracle and Blue Owl stocks tumbling over 3% on Thursday. Bloom Energy, tasked with powering the campus with its fuel cells, also saw a similar decline.
Sean McDevitt of Arthur D. Little highlights a shift in focus, stating, “The financing side of the AI buildout is starting to ask much harder questions than the demand side.” He notes that while demand for AI remains strong, investors are increasingly concerned about risk allocation.
This unease is reflected in recent market movements. Goldman Sachs revealed it is underweight on Big Tech debt, and investor Michael Burry, known for predicting the 2008 financial crisis, warned of potential write-offs related to data center deals. Burry specifically questioned Oracle’s cloud revenue projections.
As of the latest updates, Oracle and its partners remain committed to Project Jupiter, despite the challenges. The company’s ability to address these issues will not only impact its own financial health but also set a precedent for the industry. With billions of dollars at stake, the resolution of these delays and financial concerns will be closely watched by stakeholders across the AI and data center sectors.
