Chutes & Ladders, Oracle Edition: Surprise! Project Jupiter data center build overages, “social costs” multiply. Pentagon inks $7B, 10 year deal for software.

July 29, 2026 | by | No Comments

The Unexpected in the Terra Incognita of data centers whip up The Perfect Pricey Storm for Oracle. Oracle knows how to build software, not huge data center buildings. Buildings have messy things like power supply, coolant, and permitting at the local and state levels. There is also The Unexpected that any experienced builder will factor in even when unknown, whether it’s wiring, racks, chips, out of spec cement, etc., that delay Opening Revenue Day. The Unexpected increasingly includes what is termed “social costs” that start around genuine concerns such as power draw, transmission lines, water usage, disruptions, even heat foci (a Cornell Tech study found a 10 degree rise on current data centers). Many local “interests” use these tentpoles to support the classic tactics of dissuade, delay, and (ramping up) the difficulty. When the pockets like Oracle’s aren’t deep and labeled ‘debt’, this hurts.

In the New Mexico west bordering Texas, where it’s underpopulated and land is cheap, Oracle’s 1,400-acre, 2+ gigawatt Project Jupiter super data center build for OpenAI is hitting roadblocks, primarily around power. The original plan to power it with gas from its own natural gas plants hit environmental potholes. Then Oracle switched to natural gas fuel cells from Bloom Energy. They use little water, pollute less and are reasonable in carbon emissions. But the cost? $8 billion, a few billion more than the gas plants. They also have other sticky requirements; to not degrade, the cells must continuously run, which scuppers Oracle’s plan to switch off to far cheaper solar on sunny days. TTA 7 May

New Mexico and to a lesser degree west Texas have rising environmental concerns. New Mexico in particular is generally hostile to big business and fossil fuels. The natural gas pipeline needed to supply the cells that runs through New Mexico is on its second rejection by the New Mexico Environment Department. The next hearing isn’t till 19 October. The cherry on this cake? The state Attorney General is investigating complaints from local residents that their names were used fraudulently in support of said fuel cells. The greenhouse gas emissions are also claimed by environmental groups to be equivalent to New Mexico’s two largest cities, a claim that evades logic for Albuquerque alone. These groups now are pushing for a data center moratorium, a growing national cause that ignores that the data center is partly built, the water being used is non-potable from outside the area, and that the builder, Oracle, is working hard to respond to critics in the local areas by plowing money into local concerns.

Oracle isn’t the only one, but the one with the least resources. Oracle, Microsoft and OpenAI projects in Wisconsin are having costly difficulties with power authorities on building transmission lines and cost sharing. This may add $100 million to Oracle/OpenAI’s Port Washington, Wisconsin data center. Oracle’s low credit rating also hurts them, where Wisconsin’s state power regulator is requiring financial guarantees in cash or lines of credit in case the project fails. This will cost Oracle $100 million–annually. In Texas, Big AI such as Meta and Google are having more success in partnering with local power utilities in building permanent infrastructure and renewable sourcing, including closed water systems to prevent toxic wastewater runoff into land and local water systems.

So why is Oracle making a chancy bet at the Data Center Infrastructure Landlord Table? Concluding from The Information: “even though the cost to build and power a gigawatt of AI is bordering on at least $60 billion, Nvidia servers powered by its Grace Blackwell chips, renting out at $3.50 an hour, could generate around $12 billion to $13 billion a year, including operating costs.” Your Editor reads this simply as a 4-5 year payback. However, that statement rests on a mountain of assumptions–that hourly rental costs remain high, that build costs remain somewhat stable or lower, that land and construction stay relatively cost static, that the small coterie of AI customers keep paying their bills, and that local groups do not succeed, as they seem to be doing, in increasing costs, demanding moratoria, and delaying online dates.

There are many reasons why Oracle’s bonds are hovering just above ‘junk’, as Mr. Market keeps reminding us. Computing UK. Add to that list that data center cost assumptions have gone spectacularly sideways and the expectations within Oracle didn’t account for (drum roll) The Unexpected.

Oracle did have some very good news last week from the Federal Government for its first Ladder in awhile. The Department of War (a/k/a Department of Defense) is contracting with Oracle for software in a deal that could be worth up to $7 billion over ten years. The exact contract has a base value of $3.31 billion for the first five years of the agreement and a total value of $6.99 billion if the additional option years are exercised.

The DoW Enterprise Software Initiative (ESI) puts contracting into a centralized framework to expedite procurement, versus the typical individual procurement process by separate agencies. The DoW ESI covers procurement for intelligence agencies and the Coast Guard. According to CNBC, “The contract covers the use of Oracle software in on-premises data centers for branches of the military, the U.S. intelligence community and the Coast Guard, according to a statement. The Central Intelligence Agency was Oracle’s first customer. A five-year base period for the contract includes perpetual and subscription-based software licenses, maintenance and consulting, according to one description.” DoW in its own release expects savings of $441 million when compared to the cost of buying Oracle products separately. (And come on, fellow writers. It’s the Department of War at the top of the release, not the Department of Defense, whatever arguments including historical you may have about it.) Oracle release, Federal News Network

Oracle steps back from the AI debt brink with $16.3B financing for MI data center, the Project Jupiter ‘clean energy’ experiment in NM, and a major Federal DOW contract

May 7, 2026 | by

Perhaps the rabbit is being pulled from the top hat. Or it’s hungry. Three recent announcements are giving Oracle shareholders–of which founder Larry Ellison is a 40% holder–some confidence in a volatile market. While ORCL shares are slightly down year-to-date, in the past month since their massive layoff, Mr. Market has boosted them up close to 36% at time of writing, most of the runup in the past week. (Editor’s note: this analysis is meant to be directional and qualitative. It is detached from ‘stock picking’. For your Editor, the interest is in the future of Oracle Health, which is likely collateral damage from All This.)

Oracle is taking on $16 billion debt, this time largely funded by bond fund PIMCO. This funded a single data center campus in Saline Township, Michigan. Total financing announced in late April was $16.3 billion, anchored by PIMCO’s financing $10 billion of the bond tranche plus $2 billion in equity from Related Digital Infrastructure and Blackstone. It’s reported that this is the largest single-facility technology debt package ever assembled. PIMCO (Pacific Investment Management Company LLC)  is a bond fund, the largest of its type (active fixed-income), and a subsidiary of Allianz Global Investors. It stepped in because US banks refused for the reasons bulleted below.

What gives pause is the total debt picture that Oracle is taking on to develop data centers for clients–OpenAI primarily, but also Meta. 

  • $72 billion in total debt to finance the Stargate joint venture in Michigan, Texas, Wisconsin, and New Mexico. Other reports have indicated over $100 billion [TTA 10 Mar].
  • The PIMCO debt is structured as a 7.5% coupon with a 19.5-year maturity, with six years of interest-only payments followed by 13 years of amortization
  • Oracle’s long-term debt load has risen nearly 66% since the start of 2025.  Yahoo Finance
  • This is despite a BBB-negative credit outlook from S&P Global Ratings and Moody’s Baa2 Negative outlook (link), a major factor in why banks shied away from further financing.
  • $553 billion in performance obligations with OpenAI 

TNW discusses in a deeper dive the debt structure and why PIMCO could make this bet where banks could not.  The question it raises is whether the furious pace of data center building is another cycle of overbuilding–and if it is, will it be absorbed in time? The ominous parallels: the 2000s building boom in an earlier iteration of data centers, the fiberoptic boom of the early 2000s that broke WorldCom, Global Crossing, Winstar, Corning, and 360Networks, cloud overbuilding that left Amazon Web Services with years of excess capacity (it helps to have a deep-pocketed and not all that transparent parent), and others. This Editor would also liken it to the early years of 1980s-90s airline deregulation (too many airlines, too much debt, too many seats) and about a decade in the cruise ship industry where too many cabins were chasing too few people. These took decades and multiple bankruptcies to settle.

The Project Jupiter New Mexico Stargate data center is turning into an experiment to reduce the environmental/power impact of AI data centers. The alternative energy source for the Doña Ana County data center will come from fuel cells developed by Bloom Energy. The fuel cells have up to 2.45 GW of installed capacity and will replace the usual gas turbines and diesel generators, consolidating power into one single microgrid. How big this ‘microgrid’ will be is not disclosed. The data center campus is being built by a development company, BorderPlex Digital Assets, which is promoting this site as a “Tier 1 industrial engine for New Mexico”. 

Fuel cells generate electricity without combustion through electrochemically combining hydrogen and oxygen, producing water, heat, and electricity. Versus conventional power sources, they reduce nitrogen oxides emissions by approximately 92% and use a “negligible” amount of water. However, the overall picture is not quite that rosy. Other reports indicated that overall greenhouse gases emitted by the data center even with the fuel cell microgrid are estimated at 10 million tons per year, representing ~30% savings over a conventionally powered 14 million tons per year, the latter more than the cities of Las Cruces and Albuquerque. While preliminary construction is taking place, Project Jupiter is still awaiting approval from the New Mexico Environment Department and faces several lawsuits from environmental activists. SourceNM,  Oracle release

A Federal contract to expand the Department of War’s AI capabilities across their classified cloud network. No value attached, and details are naturally on the QT and strictly Hush-Hush, but Oracle’s May Day announcement says in about three ways that the agreement is for advancing AI capabilities as part of the DOW’s AI Acceleration Strategy by “enabling new capabilities across its three core tenets: warfighting, intelligence, and enterprise operations”. (Whew!) From the release: “This agreement accelerates the transformation toward making the United States military an AI-first fighting force and strengthens warfighters’ ability to maintain decision superiority across all domains of warfare.” Oracle release

Also Yahoo Finance