Oracle denies report on OpenAI data center delays

Brett Ewing, senior financial advisor and chief market strategist at First Franklin Financial Services, joins BNN Bloomberg to discuss the outlook on the market

Oracle denied on Friday a media report that it was delaying OpenAI-related data centers, following investor worries over its debt-fueled AI infrastructure buildout.

Bloomberg News had earlier in the day reported that Oracle had pushed back the completion dates for some data centers it is developing for OpenAI to 2028, a year later than planned, due to labor and material shortages.

“There have been no delays to any sites required to meet our contractual commitments, and all milestones remain on track,” Oracle spokesperson Michael Egbert told Reuters in an emailed statement.

“We remain fully aligned with OpenAI and confident in our ability to execute against both our contractual commitments and future expansion plans,” Egbert added.

Shares of Oracle, which had fallen 3.6 per cent following the report, pared some losses to be down by 2.8 per cent in afternoon trading. Other AI-related shares also tumbled, with chip giant Nvidia, Advanced Micro Devices, Micron and Arm Holdings down between two per cent and 4.5 per cent.

The Bloomberg report came a day after Oracle logged its biggest stock drop since late January, following earnings that showed rising spending and a weak outlook for a company that is increasingly reliant on OpenAI.

Long a smaller cloud-computing player, Oracle has leaped into the artificial intelligence infrastructure race this year on the back of a US$300 billion OpenAI data-center deal. But the buildout has forced the company to borrow aggressively.

Investors, spooked in recent weeks by signs that Google was pulling ahead in the AI race and by Oracle’s rising debt load, have sold off the company’s stock and bonds. The cost of insuring Oracle’s debt against default surged on Thursday to its highest in at least five years and was up again on Friday.

The shares are up just 13 per cent now for the year, having erased all the gains from a 36 per cent jump in September, when it reported a massive backlog of over $450 billion — mostly tied to OpenAI.

Investors have been growing more picky in the AI space, with less willingness to indiscriminately reward spending on AI, even as they bet on its long-term potential.

OpenAI did not immediately respond to a Reuters request for comment.

After the Bloomberg report, some analysts said the news showed bottlenecks beyond chips were emerging for the data-center expansion tech companies are financing with hundreds of billions of dollars in investment.

“Concerns about the ability to build data centers due to construction delays, power availability and other practical factors are becoming a much bigger factor than the expected demands for AI capabilities,” Bob O’Donnell, chief analyst at TECHnalysis Research, said.

But he added that the market has become more sensitive to news of AI delays as investors scrutinize payoffs from the spending.

Broadcom was also down more than 11 per cent on Friday, after warning that rising sales of lower-margin custom AI processors were squeezing profitability, stirring fears the business may be less lucrative.

(Reporting by Juby Babu in Mexico City, additional reporting by Arnav Mishra and Anhata Rooprai in Bengaluru; Editing by Krishna Chandra Eluri and Alan Barona)