Microsoft Winds Down Oracle AI Cloud Deal As Older NVIDIA GPUs No Longer Meet Its Needs - Wccftech
Microsoft is winding down its AI computing agreement with Oracle, citing that older NVIDIA GPUs no longer meet its evolving requirements.
According to a November 6 report from Bloomberg, citing people familiar with the matter, Microsoft declined to renew its contract with Oracle and has gradually been switching off the rented computing capacity over recent months. The agreement, dating back to November 2023, allowed Microsoft to leverage Oracle Cloud Infrastructure (OCI) alongside Azure to provide AI inference capabilities for Bing's conversational search engine.
GPU Requirements Evolve
At the time of the original agreement, demand for AI accelerators was outpacing available supply, forcing even major cloud providers to seek computing resources from competitors. However, Microsoft's requirements have since changed, and the older NVIDIA accelerators deployed in Oracle's infrastructure reportedly no longer meet its specifications. Neither the exact GPU models involved nor the financial value of the agreement has been disclosed.
Oracle Defends Older Hardware
Oracle has pushed back against suggestions that aging AI hardware is becoming commercially unviable, maintaining that demand for its infrastructure remains strong. During its first quarter of fiscal 2027, GPU capacity coming up for renewal was renewed or resold at a 20% premium over previous contract prices, despite most of those accelerators being at least four years old. Oracle reported GPU utilization of approximately 97.9% during the same period.
demand remains robust even for previous-generation GPUs
Infrastructure Spending Concerns
Microsoft's decision highlights growing concerns about AI infrastructure spending and the rapid pace of technological obsolescence. Oracle is particularly exposed to this challenge because of its enormous infrastructure expansion and substantial financing commitments. The company generated negative $5 billion in free cash flow during Q1 FY2027, even as cloud infrastructure revenue surged 121% year-over-year to $7.4 billion.
The situation illustrates the increasingly difficult balance between securing sufficient AI computing capacity today and ensuring that the infrastructure remains economically competitive tomorrow. Importantly, Microsoft's decision concerns a specific computing rental agreement, not the termination of its broader relationship with Oracle, which includes separate cloud partnerships like Oracle Database@Azure.
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