Oracle and OpenAI scrap deal to expand flagship Texas data centre

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Oracle and OpenAI have abandoned plans to expand their flagship data centre site in Texas, walking away from a multibillion-dollar deal even as the AI developer races to secure more computing capacity.

The Nashville-based database giant and ChatGPT maker have been in talks with developer Crusoe for a 600-megawatt expansion of the 1.2GW data centre campus in Abilene, which is being built to service OpenAI.

That expansion, which would include opening at least two new buildings for OpenAI, has fallen through, according to people familiar with the matter.

Meta has entered talks to take over the proposed facilities that OpenAI is not taking up, although these discussions were at an early stage, the people said. The facilities are not due to come online for several years.

Oracle shares fell 3.5 per cent after Bloomberg first reported the change, ending Friday down by 1.2 per cent.

Sachin Katti, a senior OpenAI executive working on infrastructure, later posted on X that the start-up had considered expanding in Abilene “but ultimately chose to put that additional capacity in other locations”.

“Today we have more than half a dozen sites under development across multiple states, including the site we’re building with Oracle in Wisconsin, where the first steel beams went up just this week,” Katti said.

The Texas site was the first to break ground under OpenAI’s Stargate infrastructure project, launched at the White House last year with President Donald Trump, whose backers include Japan’s SoftBank and Oracle.

Senator Ted Cruz toured the site in September to coincide with the announcement of an expansion.

Larry Ellison’s software group has made its huge deal to supply computing power to OpenAI the centrepiece of its pivot into the race to serve AI companies, where it is competing with larger rivals such as Amazon and Google.

Although their wider deal remains intact, the decision in Abilene suggests greater competition to service OpenAI’s vast computing demands. The ChatGPT maker has over the past year moved to diversify its supplies of vital infrastructure, including data centres and advanced chips.

Oracle has a long-term lease over the Abilene site, which is being developed by Crusoe in partnership with private capital group Blue Owl.

“Crusoe continues to be a strong and reliable partner. We are very proud of our relationship and our progress in bringing capacity online in Abilene at a rapid pace to meet our customer’s needs,” Oracle said in a statement.

Oracle suffered a setback to one site for a 1GW data centre campus for OpenAI in Michigan late last year after Blue Owl decided to walk away from a $10bn deal, the FT previously reported.

The Abilene campus forms part of the $300bn deal OpenAI signed with Oracle in September to supply the start-up with 4.5GW of computing capacity in the coming years.

People familiar with the Oracle and OpenAI deal said the 4.5GW agreement remained intact and could be fulfilled using other sites, including developments in Texas, New Mexico, Wisconsin and Michigan.

OpenAI had committed to spend roughly $600bn through 2030 for the procurement of chips and related infrastructure, the FT previously reported.

The start-up has deals in place from providers including Microsoft and Google. It signed a $100bn deal with Amazon last month.

Oracle’s mounting debt to fund its OpenAI deal has raised concerns about a potential downgrade in its credit rating, which is already several notches lower than other hyperscalers such as Amazon, Microsoft and Meta, leading to stricter leasing and debt terms.

The company raised $25bn in debt last month to help finance some of its data centre build-out as part of a $50bn funding plan that will include selling some of its equity. Analysts expect the group to undertake lay-offs and divest from some of its business units to support its all-in AI bet.

Oracle in September told investors that it planned significant restructuring this year, setting aside as much as $1.6bn to help fund payments to employees whose jobs are cut.

Shares in Oracle have fallen more than 50 per cent from their peak in September, when the OpenAI deal was announced.

Oracle, OpenAI and Meta declined to comment. Crusoe did not immediately respond to a request for comment.

Additional reporting by Michelle Chan in New York