Sudden plunge! AI giant terminates cooperation

China Fund Journalist Taylor

Hello everyone, let's briefly pay attention to an AI news that once scared the market.

On November 7, it was reported that Microsoft is gradually terminating a collaboration arrangement to lease artificial intelligence computing resources from Oracle. This is part of Microsoft's reassessment of its multi-billion dollar cloud computing partnerships.

It has been revealed that in the past few months, Microsoft has begun to gradually shut down the computing resources previously rented from Oracle after refusing to renew the contract.

Insiders stated that over time, the computing resources rented by Microsoft have gradually lost practical value, as these resources can no longer meet Microsoft's current technical specifications, with Oracle's hardware using the previous generation of Nvidia chips.

In response, Oracle stated that the demand for artificial intelligence infrastructure remains strong, which also includes previous generation graphics processors. Oracle had indicated in September this year that the company is renewing its contract for GPU servers that have been in use for four years at a premium of 20% over the original contract price.

After the news broke, Oracle's stock price plummeted overnight, dropping about 3% during the trading session, and staged a deep "V" recovery by the close.

According to the collaboration arrangement announced by both parties in 2023, Oracle agreed to provide Microsoft with server access to support the computing power for the launch of the new generation of AI-assisted Bing search engine. The full scale of this transaction is still uncertain.

As the world's largest software company, Microsoft has also driven the so-called "Neocloud" industry boom. The company has signed large-scale contracts with emerging cloud computing companies such as CoreWeave, Nscale, and Nebius to lease computing resources to enhance its artificial intelligence business capabilities.

However, Microsoft is now re-evaluating this strategy. Some key management personnel within Microsoft have expressed dissatisfaction with these emerging cloud computing service providers, primarily due to high costs and project delivery delays.

Previously, it was reported that just as Microsoft decided not to renew its contract with Oracle, the company also tightened its oversight of other data center projects, withdrawing from some projects deemed to be high risk, and is internally discussing whether to sign new emerging cloud computing collaboration agreements.

Since 2023, Oracle's cloud computing business has rapidly expanded, mainly driven by large contracts in the artificial intelligence sector, with clients including companies like OpenAI and Meta.

As of the fiscal year ending May 2026, Oracle's cloud computing business achieved revenue of $18 billion.

As Oracle continues to develop data centers and expand its cloud computing business, the company was initially seen by the market as a significant beneficiary of the AI wave. However, recently, investors have begun to worry about Oracle's massive capital expenditures. The huge infrastructure investments have already turned the company's free cash flow negative.

Since reaching a year-to-date high of $248.15 on June 1 of this year, Oracle's stock price has fallen by more than half.