Oracle's ambitious $18 billion "Project Jupiter" data center in New Mexico is facing significant hurdles, including concerns over water supply, air quality, and infrastructure setbacks. The 1,400-acre campus, intended to provide AI computing capacity for OpenAI, has reportedly encountered delays in securing power, specifically a natural-gas pipeline. This has led Oracle to issue a "force majeure" notice to the project's developer, Blue Owl, as a precautionary measure to delay payments if the data center, slated to come online in 2028, is derailed.
The project, part of a broader $500 billion Stargate initiative to build AI infrastructure, has garnered substantial financial backing, including $18 billion in loans from a consortium of banks. However, this debt is reportedly trading at stressed levels, with loans quoted at 89 to 91 cents on the dollar, amid concerns about Oracle's borrowing capacity and creditworthiness. Despite Oracle's notice, Blue Owl asserts that the financial commitments for the multi-year project remain unchanged, and Oracle cannot terminate the lease under any circumstances. Blue Owl earns a 9% yield on its equity during the development stage, expected to rise to around 11% upon completion.
Oracle's invocation of "force majeure" is seen as an attempt to delay payments rather than exit as the main tenant, especially since securing power for the site is contractually Oracle's responsibility. This move has raised concerns among lenders and investors, contributing to Oracle's stock falling around 4% to 6.4% on the day the news broke. Analysts, however, anticipate minimal short-term impact on Oracle's fiscal year 2027 revenue, as Project Jupiter is not expected to contribute revenue this year. The project has become a symbol of the growing backlash against AI data center expansion, with communities raising environmental concerns.
