Microsoft Reportedly Phasing Out Its AI Compute Leasing Agreement with Oracle

Microsoft has stopped renewing its AI compute leasing contract with Oracle and has been winding down the rented capacity over recent months, according to people familiar with the matter, because the servers Oracle supplied run older-generation Nvidia chips that no longer meet Microsoft's specifications. The 2023 agreement, whose value was not disclosed, provided compute for Microsoft's revamped Bing AI search engine; Oracle said demand for its AI infrastructure remains strong and that older GPUs still have a market. The report sent Oracle shares down as much as 4.6% intraday before paring losses to about 3%, reversing an earlier gain of roughly 3.5% and extending a decline of more than half from this year's high. The move matters because it signals Microsoft is re-evaluating external AI compute partnerships as it shifts spending toward newer hardware, having already committed over $80 billion in leasing outlays to emerging cloud providers including CoreWeave, Nscale and Nebius. Watch for further disclosures on Microsoft's cloud capex mix and whether Oracle's remaining AI contracts offset the lost volume.