Oracle stock fell by 5 percent on Wednesday after a report stated that negotiations with Blue Owl Capital regarding its support for a $ 10 billion data center in Michigan had stalled, although the cloud company later refuted the report.
According to the Financial Times, Blue Owl had talks with Oracle to fund a 1-gigawatt facility for OpenAI in Saline Township, Michigan.
People familiar with the matter reported FT that the plans have been ended due to concerns about elevating Oracle’s rising debt levels and excessive expenditures on artificial intelligence.
This comes after some investors raised red flags on the funding behind the rush to create ever more data centers. Eventually, the concerns are that other hyperscalers are resorting to the use of private equity markets despite funding the buildings directly and making lease deals that will prove risky.
Other AI names also fell on Wednesday, such as Broadcom, which dropped 4 percent, Nvidia, which fell 3 percent, AMD, which slipped 5 percent, and CoreWeave, which dropped 7 percent.
As per the people familiar with the matter, the Blue Owl indeed looked at the project but withdrew on the basis of the unfavorable conditions of debt and the arrangement of repayments.
It was reported that the Blue Owl is still engaged in the other two Oracle locations. The Blue Owl is also concerned that local politics in Michigan would slow down the construction.
The Oracle responded subsequently to the FT report by stating that the project was proceeding and that Blue Owl had never been involved in equity discussions.
In a statement, Oracle spokesperson Michael Egbert said that “Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl. Final negotiations for their equity deal are moving forward on schedule and according to plan.”
Therefore, the cloud company failed to name the company that is currently in equity discussions regarding the project. Related Digital spokesperson Natalie Ravitz informed CNBC that “The notion that Blue Owl walked away is unequivocally false. This is an exceptional project that drew significant interest from equity partners.”
Ravitz stated that the equity partner involved in the project has “unparalleled expertise in the space” but did not name the firm.
She stated that the location, projected to start the first quarter of next year, is in pre-construction with the “strong support” from Michigan Governor Gretchen Whitmer.
The FT reported that Blackstone is also considering options to take over Blue Owl Capital as a financial partner in the data center, but no deal has been concluded yet.
The FT stated that Blue Owl Capital has been the key investor in data center projects in Oracle in the U.S., such as the facility costing $15 billion in Abilene, Texas, and $18 billion in New Mexico.
In a note on Wednesday, Evercore ISI analysts wrote that “This appears to be a case where the deal simply wasn’t the right one, and seasoned investors understand that success does not require winning every transaction.”
The bank further stated that digital infrastructure is a “core growth vertical” of Blue Owl, and it will have a future digital infrastructure fund in 2026, which will be added to its existing fund of $7 billion in May.
The company said in its latest quarterly filing that Oracle also has lease commitments valued at $248 billion of data centers and cloud capacity commitments within the period of 15-19 years as of November 30. That is up almost 148 percent from August.
SEC filing indicated that the cloud computing giant had raised new debt amounting to $18 billion in September. It was during the same month that OpenAI unveiled a 5-year collaboration worth $300 billion with Oracle.
The filing showed that the company had more than $124 billion, including operating lease obligations, by the end of November. Oracle shares have fallen approximately 50 percent of the high at $345.72 in September.
