Key facts
- Oracle issued a force majeure notice for its Project Jupiter AI data center in New Mexico.
- The notice allows parties to suspend contractual obligations due to unforeseen events.
- Blue Owl confirmed the notice but stated financial commitments remain unchanged.
- A one-year delay for Project Jupiter is attributed to power sourcing issues.
- Oracle's first-quarter capital expenditures surged to $28.5 billion from $8.5 billion a year prior.
Oracle has issued a 'force majeure' notice to Blue Owl Capital concerning its Project Jupiter, a planned AI data center in New Mexico. Such notices permit parties to suspend contractual obligations when events beyond their control impede project performance. A person familiar with the matter stated the project is delayed by a year due to issues securing power for the site.
Despite the notice, Oracle has stated the project remains on schedule, and a Blue Owl spokesperson confirmed the notice, emphasizing that it does not alter the financial commitments to the multiyear initiative. The move has prompted questions from Wall Street regarding Oracle's capacity to deliver the necessary infrastructure for its burgeoning AI business.
RBC Capital Markets analyst Rishi Jaluria suggested the notice indicates a heightened perception of execution risk within Oracle, potentially increasing the likelihood of delays. Oracle has significantly increased its capital expenditures to finance new data centers, aiming to meet what it describes as surging demand for AI computing. The company reported $28.5 billion in first-quarter capital expenditures, a substantial increase from $8.5 billion in the prior year.
Lawyers indicate that force majeure provisions are becoming more common in data center development agreements, raising concerns among lenders and investors. Sean McDevitt, a partner at management consulting firm Arthur D. Little, noted that "The financing side of the AI buildout is starting to ask much harder questions than the demand side." He added, "The underlying demand still appears very strong, but investors and lenders are increasingly focused on how risk is allocated."