Microsoft winds down AI capacity rented from Oracle as older Nvidia chips no longer fit

Microsoft is winding down an arrangement to rent artificial-intelligence computing capacity from Oracle, Bloomberg reported on November 6, citing people familiar with the matter. Microsoft decided not to renew the 2023 contract and has been switching off the rented capacity over recent months. Oracle shares fell about 4% after the news broke.

Older chips no longer meet the spec; deal size never disclosed

According to Bloomberg, the reason is technical: the Oracle servers run an older generation of Nvidia chips that no longer meet Microsoft's evolving requirements for its newest AI services. The arrangement dates to 2023, when Oracle announced Microsoft would use Oracle Cloud Infrastructure (OCI) AI infrastructure, alongside its own Azure AI infrastructure, to run inference for the models behind AI-powered Bing search. The financial terms were never disclosed, and Bloomberg could not determine the deal's full value. Microsoft declined to comment.

Oracle pushes back: demand still strong

An Oracle spokesperson told Reuters on November 6 that demand for OCI's AI infrastructure remains strong. The company said on X the same day that capacity that came up for renewal in its fiscal first quarter had been renewed or resold to other customers under long-term contracts at prices about 20% above the previous agreements, even though most of those GPUs were at least four years old.

Microsoft reassesses more than $80 billion in rented capacity

Bloomberg framed the move as part of a broader reassessment: Microsoft has committed more than $80 billion to renting capacity from outside cloud providers, including CoreWeave, Nscale and Nebius, to support its AI operations. It is reportedly the third Microsoft pullback reported in the same week, after walking away from Nscale's roughly $3 billion Loughton project in the UK and cancelling a Tencent chip lease. The Information separately reported that Microsoft chose not to renew the Oracle deal.

The episode shows how fast the AI compute market has changed: in 2023, when capacity was scarce, even a cloud giant rented machines from a rival; by late 2026, a generation gap in hardware is enough to make older rented capacity worthless, with renters preferring newer chips. Whether Oracle's large order backlog can absorb its older GPU capacity remains a question for the market.