Microsoft Is Switching Off the AI Servers It Rented From Rival Oracle as It Rethinks Its Cloud Deals

Three years ago, Microsoft was so short of AI chips that it rented servers from one of its biggest cloud rivals. Now it is giving them back. People familiar with the matter told Bloomberg that the company has been switching off the computing capacity it rented from Oracle in recent months, after declining to renew the contract.

The deal dates to 2023, when Microsoft needed extra power for the new AI version of Bing. People familiar with it said the servers run an older generation of Nvidia chips, and that the capacity became less useful as it stopped meeting Microsoft's specifications. The full value of the arrangement was never disclosed. Microsoft declined to comment.

Oracle says the old chips still sell

Oracle shares fell about 4% on Friday after the report, a day after a sharp selloff in AI stocks. A spokesperson said demand for its AI infrastructure remains strong, including for earlier generation GPUs. On its September earnings call, Oracle said capacity that came up for renewal in its fiscal first quarter was renewed or resold at a 20% premium to the prior contracts, and most of those chips were four years old or more.

Investors are not in a forgiving mood with Oracle. The company recently raised its entire $20 billion fundraising cap through 2030 in a single day to pay for its AI buildout, and losing a marquee tenant, even one on aging hardware, lands at a bad moment.

A wider rethink of rented compute

Oracle is not the only supplier in the review. Microsoft has committed more than $80 billion to rent capacity from neocloud providers such as CoreWeave, Nscale and Nebius, and senior leaders have grown frustrated with high costs and delays from those partners, according to Bloomberg's earlier reporting.

Around the time it let the Oracle deal lapse, Microsoft also tightened oversight of other data center projects, pulled back from ones it considers risky and debated whether to sign new neocloud contracts at all. The company that once grabbed every GPU it could find is now deciding which ones are worth keeping.

Some offers on this page may be paid placements or contain affiliate links.