Oracle Corp.’s ambitious push into artificial intelligence infrastructure suffered a major setback Wednesday when its largest data-center financier, Blue Owl Capital Inc., walked away from a $10 billion deal for a massive facility in Michigan. The 1-gigawatt project in Saline Township, designed to power OpenAI’s computing needs, stalled amid disputes over tougher debt terms and construction delays, according to sources familiar with the matter.

Financial Times first reported the breakdown in talks, noting that Blue Owl viewed the Michigan leases as less favorable than those in prior Oracle deals, such as a $15 billion project in Abilene, Texas, and an $18 billion site in New Mexico. Lenders imposed stricter conditions due to Oracle’s ballooning debt from AI investments, pushing borrowing costs higher and eroding the investment’s appeal. Financial Times.

Oracle’s shares plunged more than 5% in Wednesday trading, dragging down the broader technology sector as investors fretted over funding risks in the red-hot AI data-center boom. The cloud giant, which has committed tens of billions to build out capacity for clients like OpenAI, insisted the project remains on track with alternative partners in advanced discussions.

Funding Talks Collapse Over Debt Pressures

Blue Owl, a private-credit powerhouse with deep ties to digital infrastructure, had been negotiating with Oracle and lenders to fund the Saline Township site. But concerns mounted over Oracle’s leverage—now exceeding $100 billion including recent issuances—and potential timeline slips for the hyperscale buildout. ‘The deal became less attractive,’ one source told Reuters, highlighting lease structures that offered weaker protections than earlier pacts. Yahoo Finance, citing Reuters.

CNBC reported Oracle’s response: The company said final negotiations with a new equity partner are progressing ‘on schedule,’ even as Blue Owl confirmed it would not participate. This comes after Oracle secured $38 billion in debt earlier this year for Texas and Wisconsin centers, underscoring the scale of its AI gamble. Posts on X from analysts like Shanu Mathew echoed the FT details, pointing to stricter leasing terms as the tipping point. CNBC.

The rift exposes fault lines in the private-credit market, where firms like Blue Owl have poured billions into data centers but are now tightening standards amid rising interest rates and execution risks. Data Center Dynamics noted Blackstone Inc. as a potential suitor to fill the void, given its history with Oracle financings. Data Center Dynamics.

Oracle’s AI Infrastructure Sprint

Oracle has emerged as a key player in AI cloud services, signing multibillion-dollar deals with OpenAI and others that demand unprecedented power and space. The Michigan center, spanning over 1 gigawatt, would rank among the world’s largest, rivaling campuses from Meta Platforms Inc. and Microsoft Corp. Yet, rapid scaling has strained finances: Oracle issued $18 billion in bonds in September alone, part of a $88 billion tech-debt wave with Meta.

Sources say Blue Owl funded about 25% of its portfolio in real estate and digital infrastructure, but recent redemptions and market volatility prompted caution. X posts from Lisa Abramowicz highlighted Blue Owl shares dropping 28% in two months, tied to data-center exposures. Oracle’s debt-to-Ebitda ratio has climbed, alarming lenders who now demand higher equity cushions and phased funding tied to milestones.

This isn’t Oracle’s first hurdle. Earlier projects in Texas faced permitting delays, and industry watchers on X, like JaguarAnalytics, warned of a ‘shock’ if lenders balk at the $38 billion unfinanced portion from prior announcements. Yahoo Finance live updates captured intraday market ripples, with Oracle sinking amid mixed session trading. Yahoo Finance.

Ripples Through Private Credit and Tech Peers

Blue Owl’s retreat signals broader caution in the $1.7 trillion private-credit arena, where data-center loans have surged. Firms face redemption pressures—Blue Owl limited some outflows—and tougher refinancing in a higher-rate world. X chatter from Kurt S. Altrichter emphasized AI capex funded by ‘unhinged’ debt issuance, with Oracle and Meta leading the charge.

For Oracle, the stakes are high. CEO Safra Catz has touted AI revenue tripling, but capex hit $21.2 billion last fiscal year, projected to climb. Losing Blue Owl, which backed multiple prior sites, forces a pivot. Data Center Dynamics speculated Blackstone’s involvement, leveraging its $1 trillion assets under management and infrastructure expertise.

Investors drew parallels to past infrastructure bubbles, though Oracle reaffirmed commitments. ‘Negotiations are on schedule,’ a spokesperson told CNBC, quelling some fears but not stock losses. Broader sentiment on X, including from LuxAlgo, framed it as an AI ‘bubble’ warning sign amid debt concerns.

Strategic Shifts and Path Forward

Oracle may lean on balance-sheet cash flows—$20 billion annually—or tap rivals like Blackstone and KKR & Co. The Michigan site’s OpenAI anchor tenant provides revenue visibility, with long-term leases at premium rates. Yet, delays could cede ground to Amazon Web Services and Google Cloud in the AI race.

Regulators in Michigan approved the project earlier, citing economic benefits like 1,000 jobs. Local opposition over water use and power demands persists, amplifying delay risks that deterred Blue Owl. FT sources indicated lenders now require 50% equity upfront, versus 30% in Texas.

As Oracle hunts new backers, the episode underscores AI buildouts’ capital intensity. X users like Sahil Bloom recalled past debt crises, but Oracle’s OpenAI ties offer a buffer. With shares off 5%, Wall Street recalibrates: JPMorgan cut targets, citing funding hurdles.

Implications for AI Investment Boom

The Blue Owl pullback reverberates beyond Oracle, questioning private credit’s appetite for hyperscale projects. Total U.S. data-center power demand could hit 35 gigawatts by 2030, per Electric Power Research Institute estimates, straining grids and financiers alike.

Peers like Microsoft, with $80 billion planned capex, face similar scrutiny. Oracle’s pivot to new partners tests its negotiating clout. If Blackstone steps in, as DCD suggests, it could stabilize the deal but at higher costs, squeezing margins.

Market watchers await updates. Oracle’s fiscal Q3 earnings in March will spotlight financing progress. For now, the Michigan snag tempers AI euphoria, reminding insiders that silicon dreams demand real dollars—and disciplined debt.