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Why Oracle Stock Just Dropped

Source The Motley Fool

Key Points

Oracle just declared force majeure on its $165 billion Project Jupiter data center.
The data center needs a lot of power, delivered by gas converted into electricity.
The gas needs a pipeline, which requires environmental permits -- which are being denied.
10 stocks we like better than Oracle ›

Oracle (NYSE: ORCL) stock sold off 6.5% through 10:15 a.m. ET Thursday morning as troubles mounted surrounding its proposed "Project Jupiter" data center in New Mexico.

The $165 billion project, which aims to build a gigantic data center in the New Mexican desert, will require 2.45 gigawatts of power. But now, that power supply looks to be at risk.

Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »

Image source: Getty Images.

Oracle's building an AI house of cards

Begin at the beginning: In January 2025, President Donald Trump announced Project Stargate, a massive effort to build AI capacity in the U.S., spearheaded by OpenAI, SoftBank Group, and Oracle. Project Jupiter was to be the keystone of Stargate, with Oracle building the data center, Bloom Energy (NYSE: BE) providing it with power from on-site fuel cells, and Energy Transfer LP (NYSE: ET) supplying those fuel cells with natural gas to convert into electricity.

Problem is, to get the gas to the site, Energy Transfer needs to build a 17-mile gas pipeline -- and it's having trouble getting the environmental permits to do this. Construction of the pipeline was supposed to begin in August 2026; it's been postponed to February 2027 -- and may not meet that target either.

As a result of the delays, Oracle has declared force majeure, seeking to protect itself from obligations to pay the project developer, Blue Owl Capital, for the data center if it's not completed by 2028.

What this means for Oracle

The way all of this has played out, putting Oracle in force majeure -- because of complications arising two levels up the supply chain from its own area of responsibility -- illustrates the risks built into our current AI revolution.

The specific AI company you invest in could do everything right... and still fail because of others' mistakes.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bloom Energy and Oracle. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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