Oracle at center of tech's $500 billion AI-fueled rent spree

"Cloud-computing companies including Oracle Corp., Microsoft Corp. and Meta Platforms Inc. have committed to spend a combined $500 billion on data center leases in the coming years, an astronomical sum that underscores the bet the industry is making on artificial intelligence. These obligations have steadily climbed in recent quarters as tech giants inked deals to rent server farms, according to a Bloomberg analysis of quarterly filings."

"The future costs, which are in addition to active leases, won't appear on companies' balance sheets until they begin making payments on them. Generally they're tied to data centers, but can also include facilities such as offices or warehouses. Some leases also include clauses that allow companies to escape future obligations under certain conditions. Oracle has committed the most money to data center leases, inking some $150 billion worth in just the three months ending in November, bringing its total commitments to $248 billion."

"The company is embarking on a historic build-out of data centers to power the training and deployment of OpenAI's latest models. Amid the spending binge, Wall Street has become more focused on data center leases that can last as long as 19 years. After Oracle quietly disclosed its leasing plans in a filing, investors already antsy about its rising expenses sold the shares. We see this additional disclosure as indicating Oracle will be significantly strapped for capital, DA Davidson analyst Gil Luria wrote last week."

Cloud-computing companies including Oracle, Microsoft and Meta have committed a combined $500 billion to future data-center leases to support AI workloads. These obligations have risen in recent quarters as firms rent server farms rather than build outright. Future lease costs remain off-balance-sheet until payments begin and can cover offices or warehouses as well as data centers. Some contracts include escape clauses that can limit future obligations. Oracle has the largest commitments, around $248 billion total with roughly $150 billion signed recently, and is expanding data centers for OpenAI model training. Wall Street is watching long-term leases up to 19 years.

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