Microsoft is winding down a 2023 deal to rent AI computing from Oracle after declining to renew it, Bloomberg reports. The servers ran older Nvidia chips. Microsoft is reassessing more than $80B in contracts with outside cloud providers.

Microsoft is winding down a deal to rent AI computing power from Oracle, Bloomberg reported on Friday, citing people familiar with the matter. Microsoft has been switching off the rented capacity in recent months after deciding not to renew the contract.

The servers ran older Nvidia chips and no longer matched what Microsoft needed, the people said. Ageing hardware is a growing worry: Gartner has warned that much AI infrastructure spending could face large write-downs as newer chips arrive.

The deal, announced in 2023, gave Microsoft Oracle servers to run its AI-powered Bing search, and Bloomberg could not determine its full size. Separate talks for Microsoft to lease more Oracle capacity collapsed in June, Business Insider reported.

Microsoft declined to comment. Oracle said demand for its AI infrastructure remains strong, including for older chips, and its shares fell about 3%.

Microsoft has committed more than $80B to rent capacity from other cloud firms such as CoreWeave, Nscale and Nebius. Its leaders have grown frustrated with their costs and delays, Bloomberg said. This week, it reportedly turned down an option to expand a Nscale deal in Texas, weeks after pulling out of a Nscale site in the UK.

The news adds to Oracle’s troubles. Heavy spending on AI data centres has pushed its free cash flow negative and its credit rating to one notch above junk. Its shares have more than halved since a June peak.