Oracle Shares Fall 4% as Microsoft Winds Down AI Deal

Oracle shares dropped 4% on Friday, November 6, after reports emerged that Microsoft was reducing its use of rented artificial intelligence computing capacity from Oracle. The decision followed Microsoft's refusal to renew the agreement and added pressure to technology stocks already facing concerns about AI infrastructure spending.

According to Bloomberg, Microsoft had been switching off computing capacity rented from Oracle over recent months. People familiar with the arrangement said the companies did not renew the contract as Microsoft reassessed its computing requirements and cloud infrastructure partnerships.

The development raised questions about the durability of major technology companies' investments in AI computing resources. However, the reported decision does not necessarily indicate declining demand across Oracle's infrastructure business.

The rented servers had become less suitable for Microsoft's requirements because they relied on older-generation Nvidia chips. Those processors no longer met the specifications needed for Microsoft's evolving artificial intelligence workloads, according to people familiar with the matter cited by Bloomberg.

Microsoft declined to comment on the reported decision. Oracle, meanwhile, maintained that demand for its AI infrastructure remained strong, including for computing systems equipped with earlier-generation graphics processing units (GPUs).

Oracle had previously highlighted continued interest in older hardware. In September, the company said it was renewing contracts involving four-year-old GPUs at prices carrying a 20% premium over their original agreement prices.

The arrangement between Microsoft and Oracle dates back to 2023, when Microsoft sought additional computing resources for a new AI-powered version of its Bing search engine. The agreement allowed Microsoft to rent servers from Oracle, a major competitor, as technology companies competed for limited computing capacity.

Bloomberg reported that the full financial value of the agreement could not be established. Its original purpose reflected the growing need for computing infrastructure as companies developed and deployed increasingly advanced artificial intelligence models.

The announcement also came amid broader market pressure following Thursday's technology selloff. The Nasdaq Composite plunged 5.5%, while the Philadelphia Semiconductor Index dropped 12%, marking its steepest decline since March 2020.

The market downturn reflected investor concerns about the scale of artificial intelligence infrastructure spending, expanding data center investments and valuations among companies benefiting from the AI investment boom.

Oracle's declining share price therefore coincided with a wider reassessment of technology companies' infrastructure commitments, while the company continued to report strong demand for its AI computing services.