Oracle (ORCL) Stock: Falls 5.40% as Blue Owl Withdraws From Michigan AI Data Center Project

TLDRs

• Oracle shares fell over 5% after Blue Owl withdrew from financing a politically sensitive Michigan AI data center project.
• Investor concerns centered on state policy risk, as Michigan lawmakers debate repealing data center tax incentives.
• Blackstone and Bank of America may step in, but the episode highlights rising scrutiny of data center economics.
• The selloff reflects broader market unease about political uncertainty impacting long-term AI infrastructure investments.

Oracle shares slid sharply on Thursday, falling about 5.40%, after reports emerged that Blue Owl Capital has opted not to provide equity financing for a major AI-focused data center project in Michigan. The move unsettled investors, who viewed Blue Owl as a consistent and reliable partner in Oracle’s expanding cloud and artificial intelligence infrastructure strategy.

Oracle Corporation, ORCL

While alternative financing options remain on the table, the withdrawal underscored growing concerns about political risk and cost uncertainty surrounding large-scale data center developments in the United States.

The Michigan project, expected to anchor Oracle’s AI infrastructure expansion in the region, is structured in a way familiar to the company. Oracle is not expected to borrow directly but would instead commit to a long-term lease, while third-party investors supply the equity and debt. This model has been used successfully in other states, including Wisconsin, Texas, and New Mexico.

Blue Owl Exit Raises Questions

Blue Owl’s decision to step away from the Michigan data center reportedly stemmed from concerns over less attractive deal terms and the potential for delays tied to local political dynamics. In Michigan, lawmakers are actively considering legislation that could roll back or repeal data center tax incentives, a core pillar supporting the economics of such projects.

Although Governor Gretchen Whitmer has publicly backed the initiative, calling the roughly $7 billion Saline Township proposal the largest economic development project in the state’s history, the presence of bipartisan opposition has introduced uncertainty that financiers are unwilling to ignore.

For Oracle, the market reaction reflected not just the loss of a single partner, but what that loss signals. Blue Owl’s withdrawal highlighted how sensitive infrastructure investors have become to policy volatility at the state level, particularly as data centers grow larger, more power-intensive, and more politically visible.

Financing Shifts to Blackstone

Despite Blue Owl’s exit, the project is far from abandoned. Blackstone is reportedly in discussions to provide the equity portion of the financing, while Bank of America is leading a massive $14 billion debt package tied to the development. This suggests that institutional appetite for AI infrastructure remains strong, even if pricing and risk tolerance vary by investor.

Oracle’s lease-based approach depends heavily on predictable, long-term operating costs. Tax incentives, energy pricing, and zoning certainty play an outsized role in determining whether projects meet return thresholds for both tenants and financiers. In states like Texas, cost estimates for similar data center builds have ballooned dramatically over short periods, underscoring why investors scrutinize local policy environments so closely.

Political Risk Weighs on Data Centers

Michigan’s debate is emblematic of a broader national trend. Around 36 states currently offer some form of tax incentive for data centers, yet political scrutiny is intensifying. Concerns range from farmland preservation and grid strain to questions about whether public subsidies deliver sufficient economic benefits. In Michigan, critics argue that multiple large data centers could push peak electricity demand significantly higher, adding stress to local infrastructure.

Past experience also looms large. Similar proposals in other Michigan townships have stalled or collapsed following local opposition, reinforcing fears that even governor-backed projects can face unexpected roadblocks. For Oracle and its partners, these dynamics translate directly into timeline risk,that quickly becomes financial risk.

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