Oracle invokes force majeure on $165B New Mexico data center campus over power delays

Force majeure notice and contract terms

Oracle issued a force majeure notice to developer Blue Owl Capital regarding Project Jupiter, a 1,400-acre data center campus under construction in Doña Ana County, New Mexico. The technology company seeks to defer payments if the facility fails to open on schedule in 2028, following delays in securing electrical infrastructure. Under the existing agreement, power delivery risk remains with Oracle, leaving the company liable for carry costs in lieu of rent for up to three years if the first phase is not operational by the first half of 2027. These contractual carry costs require Oracle to cover interest payments to debt holders in full alongside equity returns for Blue Owl funds. Oracle shares dropped approximately 4% in premarket trading following reports of the notice.

Project Jupiter remains on our planned schedule. We are committed to New Mexico and confident in our path forward.

Permitting setbacks and pipeline rerouting

Project Jupiter represents a 2.45-gigawatt installation intended to provide computing capacity to OpenAI under the broader Stargate program, with projected costs reaching up to $165 billion. The facility relies on Bloom Energy fuel cells powered by natural gas, but the project encountered regulatory hurdles when the New Mexico State Land Office denied rights-of-way for a dedicated supply pipeline in March and again in July. Land Commissioner Stephanie Garcia Richard cited project emissions and pressure on local water resources in rejecting the applications. In response, pipeline builder Energy Transfer rerouted the 17.8-mile line across federal land and adjusted its target start date from 15 August to 1 February. Although the New Mexico Supreme Court rejected two challenges against project permits, the resulting timeline adjustments led Oracle to assert force majeure protections.

Debt exposure and financing strain

Late last year, a consortium of more than 20 financial institutions led by BNP Paribas, Goldman Sachs, MUFG, and SMBC provided $18 billion in four-year construction debt for the development. Efforts by the lead lenders to syndicate the debt package stalled due to investor caution over Oracle's credit profile, leaving the loans trading below 90 cents on the dollar. Project Jupiter serves as the centerpiece of Oracle's $300 billion contract to supply computational power to OpenAI.

The financing side of the AI buildout is starting to ask much harder questions than the demand side. The underlying demand still appears very strong, but investors and lenders are increasingly focused on how risk is allocated.

Repercussions across the artificial intelligence sector

The dispute over risk allocation in New Mexico has caused repercussions across other proposed data center financings. Following Oracle's notice, developer SB Energy chose to delay its planned initial public offering for an Ohio campus intended to support OpenAI. Lenders and investors are reviewing contractual terms across the sector as Moody's projects annual artificial intelligence capital expenditures by the six largest United States technology companies to reach approximately $1 trillion in 2027.