Here's How Oracle's "Force Majeure" Changes the AI Data Center Thesis

Artificial intelligence (AI) stock investors recently learned a French term after Oracle (NYSE: ORCL) issued a "force majeure" notice to Blue Owl Capital (NYSE: OWL) regarding Oracle's $165 billion data center project. This is a request from Oracle to pause rent payments if the project is delayed beyond 2028, but it is up to Blue Owl Capital to honor that request or challenge it in court.

Oracle said its 2.45-gigawatt New Mexico facility remains on track for completion in 2028 but flagged New Mexico's challenging regulatory environment as an obstacle to revenue recognition.

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Neocloud and colocation providers with existing infrastructure have an edge

Oracle's force majeure shows how complicated it is to secure power and permits while achieving local acceptance. While the White House has a clear-as-day pro-AI stance, building AI data centers still involves many headaches.

That ultimately places more value on existing AI infrastructure, which is good for stocks like Nebius Group and Iren. Colocation providers like Cipher Digital and TeraWulf also benefit, as they are already building data centers.

With AI demand continuing to surge and more roadblocks for data centers appearing, the annual value of a megawatt may continue to rise. Nebius says it's securing short-term deals above $40 million per megawatt, while the annual value of a megawatt was just $12 million at the start of the year.

New competitors have a more difficult path to entry

Many companies are building data centers, but not all of those sites will be completed. Even a tech giant like Oracle is nervous about legal obstacles that could slow its progress, and not every operator has Oracle's capital.

Between April and June, 45 data center projects were blocked or delayed due to public opposition. Research group Data Center Watch found that this affected $68 billion worth of projects. Negative public sentiment is a real obstacle that future projects will have to deal with.

Iren appears to be doing the most to win the good graces of the public. It is sponsoring the City of Badajoz Academy basketball team in Spain. That's relevant since Iren has a 300-megawatt data center project in Badajoz. Iren also secured a sponsorship with the NBA's Golden State Warriors to appear in front of more tech executives, which may strengthen the company's public image.

Oracle's recent move demonstrated that many factors are outside a data center builder's control. Companies that have already received approval to build data centers may appreciate meaningfully in the future.

Marc Guberti has positions in Cipher Digital and Iren. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.