Oracle’s Collapse–$200 Billion In Data Center Shut Downs
Oracle's Project Jupiter is just one casualty in a growing wave of blocked and delayed data center construction that threatens to destabilize the entire AI infrastructure boom, and the warning signs point far beyond one struggling company.
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Oracle (NYSE: ORCL | ORCL Price Prediction) is in trouble. Its Project Jupiter in New Mexico has been delayed, in part, by local resistance. It has begun to take legal action to stop payments to suppliers. According to Bloomberg, “Oracle Corp. is moving to shield itself from racking up expenses on a massive data center being built in New Mexico, adding a fresh wrinkle to a project beset by opposition and regulatory setbacks.” It is just the tip of the iceberg.
Depending on who is counting, the data centers being blocked by local groups and politicians have a combined value of between $64 billion and $200 billion. Most recently, WSLS put the figure at $130 billion, but that is for construction blocked earlier this year. Earlier this week, Gizmodo put the figure at $200 billion. The Information says 500 data centers have been delayed this year.
Oracle is a small player in the data center world, at least compared to the megacaps like Amazon (NASDAQ: AMZN) and the massive private companies led by OpenAI and Anthropic. Wall St. worries it lacks the balance sheet to handle major delays. And that may be true for much of the industry, eventually.
Depending on who is counting, again, data center investments could reach $10 trillion in the next three years. That is more than double Germany’s annual GDP. Economists believe that most of US GDP growth over the same period will be AI-related. That may be revenue for the biggest AI players. It will also be the costs of data center buildouts.
Nervousness already exists about whether data center building debt is risky. As Apollo recently told CNBC regarding credit default swaps, “Corporate debt issued by the giant cloud computing players powering the artificial intelligence boom is getting riskier.” There are two risks. One is that AI will not create explosive revenue growth. That means some data center capacity will go unused and not create revenue to pay for the infrastructure. The other is delays for data centers already designed and partially paid for.
Oracle has been the AI warning signal. As worries about its future have risen and balance sheet risk across the industry has spread, Oracle’s stock is down 55% in the last year. Contrast that with Microsoft (NASDAQ: MSFT), whose stock is flat over the same period.
If there is real trouble in the AI world, Oracle’s stock will reset much further down. It has already proven that it is a downside risk warning signal. Project Jupiter may only be the start.
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
