Oracle has invoked ‘force majeure’ to mitigate potential cost increases related to its New Mexico data center project, according to a report by Bloomberg.
Oracle is taking steps to protect itself from potential cost increases associated with a significant data center project in New Mexico by issuing a “force majeure” notice to the project’s developer, a unit of Blue Owl, as reported by Bloomberg.
In a statement to CNBC, Oracle affirmed, “Project Jupiter remains on our planned schedule. We are fully committed to New Mexico and confident in our path forward.”
The company is reportedly seeking to delay payments on the campus if it does not become operational as expected by 2028. Blue Owl Capital responded, stating, “This notice does not change the financial commitments to this multi-year project.”
The New Mexico data center is a crucial component of the broader Stargate artificial intelligence infrastructure initiative. However, it has encountered several challenges, including local opposition to data centers ahead of the upcoming midterm elections.
Typically, companies invoke force majeure to relieve themselves of contractual obligations when unforeseen issues arise, a strategy that can raise concerns among lenders and investors. Oracle noted, “Force-majeure notices are commonplace in developments of this scale and are often used to preserve contractual rights among project partners. They do not, by themselves, establish a project delay or change delivery expectations.”
According to media reports, the 1,400-acre Project Jupiter campus has secured $18 billion in loans from a consortium of banks and is part of Oracle’s broader agreement with OpenAI to provide AI computing capacity.
During the company’s earnings call on September 10, Oracle co-CEO Clay Magouyrk assured analysts that Project Jupiter would not impact its previously stated fiscal 2027 revenue or earnings guidance.
Despite these reassurances, concerns have been mounting regarding Oracle’s $18 billion in debt linked to the data center, which is reportedly trading at stressed levels, according to the Financial Times.
Data centers have increasingly faced opposition, becoming a political flashpoint as communities express worries about their impact on local energy, water, and other natural resources.
Brokerage William Blair commented that while the recent news heightens concerns about regulatory and power-related delays affecting AI deployments, it anticipates minimal short-term impact on Oracle. “Practically, fiscal 2027 should not be affected, since Jupiter contributes no revenue this year,” the firm stated.
Following the announcement regarding the force majeure, Oracle shares experienced a decline of 4% on Thursday.
This development highlights the complexities and challenges facing major tech companies as they navigate the regulatory landscape and community concerns surrounding large-scale data center projects.
For further details, refer to Bloomberg.