Oracle owes New Mexico data centre investors even with no power, after force majeure filing over permits

Since when does failing to get a permit count as force majeure? Majeure is supposed to mean something big and out of anyone's control, like a hurricane.

Oracle is in a pretty bad spot here and this is a desperate move. Their debt has been rated just above junk since July and they are way over leveraged, which is why the share price keeps sliding.

Don't forget Oracle is basically a law firm with a software branch attached. Investors who call this force majeure claim nonsense will have to drag them through court, and Oracle is probably counting on that taking years.

Agreed. Most of these leases explicitly carve permitting out of force majeure, since getting the permits is the tenant's job.

Right. Feasibility and resource availability is your first job before you buy land or break ground. For a house the bank wants at least a certificate of water availability from the utility.

I'm curious what happens to the gigawatts of fuel cells this project supposedly bought. Oracle signed a deal with Bloom Energy for 1.8GW of solid oxide fuel cells, then expanded it to 2.8GW in April. Now I wonder if they ever intended to deploy them or if it was circular financial engineering.

I thought fuel cells were an energy storage system, not generation. Surely it's cheaper to connect the data center straight to generation, either by upgrading the grid or building generators nearby.

The units can be resold though. Anyone wanting to supply a data center with their own power wants them badly, so demand is high enough that they might turn a profit.

The tech has been mature for a while, but too expensive. Since combustion engines are sold out for years, data centers are grabbing anything they can get, and the extra millions on power generation are a rounding error.

Is this a too-big-to-fail that's about to fail and will get bailed out? I also wonder about the fuel cell purchase being mostly for show. Keeping a company like Oracle running while squeezing out cash is business as usual.

I don't love Oracle, but they made a pile of money selling the best relational database on the planet for 40 years. Their real business model is landing government contracts, which is its own game.

The AI bubble has built a giant web of commitments backed by a debt bomb. It all depends on net new cash flowing in to pay for it, and we're seeing the early signs of that unraveling.

When new money pays off the old, that's a ponzi scheme.

What matters here is who structured their deals correctly. Hyperscalers usually put building and hardware in separate SPVs so a failure only loses the hardware. Did Oracle actually insulate itself, or can debtholders reach Oracle proper on default? Either way mutual funds and pensions hold so much AI debt that a 2008-style cascade is hard to avoid.

Oracle is on the hook for practically everything here. If AI implodes they end up a smoking crater, and I can't say I feel bad about that.

Good to know RAM, GPU, and SSD costs have shot up over the last year so Oracle can fill giant buildings with hardware it can't even switch on.