Oracle Issues Force Majeure Notice on Its $18 Billion New Mexico AI Data Center, Shares Fall 3.3%

Since Oracle broke ground on the 1,400-acre Project Jupiter campus in New Mexico as part of the $500 billion Stargate build-out with OpenAI and SoftBank, the site has run into one obstacle after another. Today Oracle escalated its response, sending a formal "force majeure" notice to the Blue Owl Capital unit developing the project, according to a person familiar with the matter cited by Reuters.

Oracle shares fell 3.3% Thursday on the news, first reported by Bloomberg News.

Force majeure is a contract clause that lets a company avoid penalties when events outside its control disrupt a deal. Here, the trigger is potential delays in securing power for the site, according to Reuters. Under the lease, Oracle is responsible for lining up that power. It cannot terminate the agreement outright, the source said, but the notice lets Oracle stretch out the period during which it pays Blue Owl's lower development-stage rent instead of moving to the higher completed-project rate.

Blue Owl earns a 9% yield on its roughly $3 billion in equity in the project during development, rising to an expected 11% levered yield once the data center is finished, the Reuters source said. Oracle still owes the debt costs on the $18 billion in loans a bank consortium arranged for the project. Blue Owl said the notice "does not change the financial commitments to this multi-year project."

Oracle is pushing back on any suggestion the campus is behind schedule. "Project Jupiter remains on our planned schedule," the company said Thursday. The Motley Fool noted that Oracle made the same claim directly to CNBC, adding that "we are fully committed to New Mexico and confident in our path forward."

The market isn't fully buying the reassurance. The Financial Times reported, as relayed by The Motley Fool, that the $18 billion in project financing had fallen to 89 to 91 cents on the dollar as of last week, landing in "stressed" territory where lenders are willing to offload the debt for less than face value.

The holdup traces back to a natural-gas pipeline meant to power the site. New Mexico's state land office has blocked Oracle's original plan and a revised version, according to The Motley Fool. Legal fights over water and air-quality permits have piled on top of that, Reuters reported. An Albuquerque Journal poll found 65% of state residents opposed the campus being built at all.

Oracle's cloud infrastructure business is growing fast enough to make the stakes obvious. Sales in that unit jumped 121% to $7.4 billion last quarter, and Oracle's remaining performance obligations, the contracted revenue it hasn't delivered yet, reached $664 billion, per The Motley Fool. Oracle stock closed Thursday at $139.54, down $5.02, giving the company a $437 billion market cap, well off its 52-week high of $322.54.

The backlash isn't just in New Mexico

Project Jupiter's troubles fit a national pattern. CNN Business reported that more than 300 jurisdictions across 44 states have enacted moratoriums against data center construction, and that roughly a third of large law firms now run dedicated data center practice groups. Phoenix land-use attorney Jason Morris told CNN he now spends 70% of his time on data center disputes, up from 10% a few years ago, fighting lawsuits over noise and water use while also battling regulators for permits.

The fight over who pays for the power isn't limited to the U.S. either. In Australia, a Senate inquiry heard renewable energy advocates argue that AI data centers should be required to fund new wind, solar and battery capacity rather than simply buy up electricity from projects that already exist, according to the Epoch Times. Clean Energy Investor Group policy director Nicholas Aberle said 92% of his organization's members expect data center demand to boost renewable investment, since long-term power contracts from data centers can unlock stalled projects.

Not everyone at the hearing agreed that's a fair trade. Australian Senator Sarah Henderson called the renewable industry's testimony "some of the most self-serving evidence," arguing data centers "should not become a financing mechanism for the renewable energy industry dressed up as energy policy" and that they have "a right to source the cheapest form of power." Energy analyst Tristan Edis countered by asking how the country would otherwise meet 32 terawatt-hours of new demand, noting Green Energy Markets data showing 41,000 megawatts of approved wind and solar projects sitting idle for lack of contracts. Both sides agree the power has to come from somewhere. They disagree on who should be forced to build it.

Back in New Mexico, the next milestone is whether Blue Owl formally accepts that a qualifying "force majeure" event occurred, a step The Motley Fool noted is required before Oracle's rent relief takes effect. Whether the natural-gas pipeline dispute gets resolved before Project Jupiter's planned 2028 online date remains unsettled, and so does the price of the $18 billion in loans still trading below face value.