Oracle stock falls 4% as Microsoft winds down AI cloud capacity deal

Oracle’s share price fell about 4% on Friday, 6 November, to its lowest level since March 2024, after reports that Microsoft is winding down a deal to rent AI computing capacity from Oracle. Microsoft’s own shares barely moved.

According to people familiar with the matter, Microsoft has been switching off the computing power it rented from Oracle in recent months after deciding not to renew the contract, as part of a wider review of cloud partnerships worth billions of dollars. Neither company commented immediately.

Why would Microsoft walk away?

The reported reason is the hardware. The capacity ran on older generations of Nvidia chips that no longer match what Microsoft wants for its AI services. The deal dates back to 2023, when Oracle said Microsoft would use Oracle’s cloud alongside its own Azure platform to run AI features for Bing’s chat search.

The value of the contract has not been made public.

Why the market cared so much

Oracle has bet heavily on building data centres for AI companies, and its share price has swung on every hint about whether that demand will last. The news landed a day after a sharp sell-off in AI stocks in New York, as investors questioned how long Big Tech can keep spending on AI infrastructure. Losing even part of Microsoft’s business fed that fear.

Oracle’s position is that demand for its AI infrastructure remains strong, including for older chips.

What it means for Pakistan

Pakistan’s IT companies and freelancers sell cloud, data and AI services to US clients, often built on Microsoft Azure or Oracle Cloud. A pull-back in AI data-centre spending can mean slower hiring and tighter budgets on those projects. AI hardware also ages fast: chips that were cutting-edge in 2023 are now being switched off.

This is market information, not investment advice.

Oracle’s next earnings report, due in December, will show how much of its AI order book is still on track.