Seema Mody reports that Blue Owl has decided not to pursue Oracle's $10b Michigan data center due to unfavorable economics, according to a source familiar.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

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Blue Owl has opted not to pursue involvement in Oracle's planned $10 billion, 1-gigawatt data center in Michigan, a project intended for Oracle's main customer, OpenAI. The decision was attributed to unfavorable debt terms and local issues that could delay the project, according to a source familiar with the matter.

Despite Blue Owl's withdrawal, Oracle stated that its development partner selected the best equity partner from several options and that final negotiations are ongoing. The project continues amid heightened market scrutiny over the capital-intensive nature of data center development and Oracle's increased use of debt, but Oracle affirms the Michigan project is not on hold.

Blue Owl decided not to pursue Oracle $10B Michigan data center

Oracle's AI ambitions on the heels of this new report now on the fate of a data center in Michigan. For that we'll turn to Seema Modi. Important story, Seema. It is, Carl. They're having these questions surrounding Oracle's 1 gigawatt data center in Michigan and who will finance this 10 billion dollar project following an FT report that suggests talks are breaking down. Oracle telling CBC that the FT story is incorrect and that its development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl, and that final negotiations are moving forward. Now I'm told by a source familiar that Blue Owl decided to not pursue this data center that Oracle is developing for its main customer, Open AI, due to unfavorable debt terms involving the structure of repayments and that through their due diligence process it was found that local issues in Michigan too would add to some delays of that project. Now Blue Owl is still involved with two other Oracle data centers. The details of this specific Michigan deal, guys, comes as the market is growing more concerned with the capital-intensive nature of developing these data centers tied to also Oracle's increased use of debt to fund these projects, the movement in its credit default swaps, which of course has raised another set of questions around credit. So my sense is that these projects are moving forward. The details tied to each deal though are just being scrutinized more so than perhaps six to eight months ago. So Seema, it seems as though based on your reporting Blue Owl made a credit decision and again you referred to the equity. I mean in these deals there's the equity and then there's as well the debt that goes on top of it. Can you clarify at all what we're talking about here? Yeah, my sense is that one of the reasons Blue Owl did not pursue this ten billion dollar project that Oracle is trying to develop in Michigan is due to the debt terms of this deal and not so much the equity, more about the debt story and also just the repayment structure of the debt that would be required to develop and finance this specific deal. But again I think it just comes as more investors evaluate these deals, they're just becoming much more critical, David, of the nuances and granularity of these deals than perhaps earlier this year when it was like let's just get in, this is gonna be a big long-term bet and it's going to pay off. But as we debate the return on investment, investors too are becoming a bit more critical. Right, but it doesn't appear as though the deal itself or I should say the project itself is on hold in any way. That's what the company is saying, that they're in final discussions with a number of different partners and that this deal will move forward, that's the latest we have. Yeah, Oracle shares now this is going to fill the gap going back to June rather than September at 178. Thanks Seema, Seema Modi.

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Blue Owl decided not to pursue Oracle $10B Michigan data center

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