⚡ Old GPUs aren’t being renewed; racks are waiting for power in the warehouse
The world’s largest compute tenant has started choosing machines by age.
Bloomberg reported on November 6 that Microsoft is no longer renewing its AI compute leases with Oracle and has been winding them down over the past few months. The servers in this batch from Oracle use older-generation Nvidia chips that can’t keep up with Microsoft’s current specs. Wrong vintage. Reuters echoed the report the same day; Microsoft declined to comment. An Oracle spokesperson said demand for OCI remains strong, including for earlier GPU generations. In September, Oracle also disclosed that it was renewing GPU leases deployed four years ago at prices 20% above the original contracts.
The market moved faster than the words. Oracle shares fell as much as nearly 5.2% intraday, setting a new low of $109.21, then closed up 0.8% at $116.10. That’s half the June 1 price of $248.15.
The Bloomberg report the day before was more pointed. Microsoft had committed to more than $80 billion in leases with newer cloud providers like CoreWeave, Nscale, and Nebius, and is now reviewing them one by one. It won’t exercise the option to expand Nscale’s Texas project by about 700 megawatts; the existing 240 megawatts remain unchanged. It has already pulled out of its flagship project in Loughton, Essex, UK, worth about $3 billion. Local power won’t be available until the 2030s. Waiting for power. Amazon moved earlier: internal emails show AWS is taking delivery ahead of schedule under a new process. About $5 billion in GB300 racks arrived in August, followed by roughly $3 billion more each month. Some data centers have room for the racks but not enough power, so the machines are sitting in intermediate warehouses. Power is the bottleneck.
Ending leases doesn’t mean Microsoft is pulling back. Last quarter, Azure revenue was $33.165 billion, up 48% year over year; commercial remaining performance obligations were $677 billion, up 73%; quarterly capital expenditure was $45.2 billion, up 30%; and free cash flow fell 27% year over year. The money is shifting toward building its own infrastructure.
The contrast with crypto is clearest here. IREN was originally a Bitcoin miner. In its November 5 quarterly report, AI cloud revenue was $200 million, up 182% quarter over quarter, with an 86% gross margin. Bitcoin mining revenue fell from $67 million to $28 million, and mining rigs are being dismantled. Its GPU hardware on the books rose from $2.04 billion to $5.82 billion, with $4.61 billion in construction in progress. This is also the company that, after Microsoft requested a network design change, pushed its $4 billion annualized revenue target from year-end to January next year, with a possible delay to the end of February.
One company, two depreciation schedules. Two clocks. GPUs are replaced every three or four years; data centers are depreciated over 20. The difference comes down to who owns the land and controls the power. That’s why it can sign five-year contracts at $220,000 per megawatt, with customers prepaying 90% of GPU capital expenditure. Short-term contracts are quoted at $40 million per megawatt. When old-card leases expire, they’re renewed at double the price, and buyers still have to queue for deliveries. The mining industry has been through this before. A new ASIC generation comes every three years, and resale value moves with coin prices and electricity costs. Platforms that lent money against mining rigs in 2021 were later crushed by falling used-rig prices. Nobody wanted to take them.
A third party offers a yardstick. On October 14, Gartner estimated that, at the current rate of spending, more than $3.5 trillion in AI infrastructure could be impaired before 2030. It would take $8.5 trillion in revenue to cover that spending plus a 12% return on investment; Gartner forecasts related revenue of at most $3.6 trillion. The gap is there.
In the markets, BTC was at $74,285–$74,406, down 2.1% over 24 hours. ETH was at $2,111, down 5.6%. AI-themed tokens didn’t all move down in unison. TAO at 218.6 was down 2.9%; FET at 0.1423 was down 1.1%; RENDER at 1.602 was up 1.8%; NEAR at 3.53 was down 5%.
Compute leasing now sells two credentials: delivery date and chip vintage. Old GPUs won’t rot in a warehouse; they’re waiting for a buyer who doesn’t care about the year they were made, and a power line that’s live.
#中本聪国际社区Baoluo币商资本 #加密货币 #ComputeLeasing
The world’s largest compute tenant has started choosing machines by age.
Bloomberg reported on November 6 that Microsoft is no longer renewing its AI compute leases with Oracle and has been winding them down over the past few months. The servers in this batch from Oracle use older-generation Nvidia chips that can’t keep up with Microsoft’s current specs. Wrong vintage. Reuters echoed the report the same day; Microsoft declined to comment. An Oracle spokesperson said demand for OCI remains strong, including for earlier GPU generations. In September, Oracle also disclosed that it was renewing GPU leases deployed four years ago at prices 20% above the original contracts.
The market moved faster than the words. Oracle shares fell as much as nearly 5.2% intraday, setting a new low of $109.21, then closed up 0.8% at $116.10. That’s half the June 1 price of $248.15.
The Bloomberg report the day before was more pointed. Microsoft had committed to more than $80 billion in leases with newer cloud providers like CoreWeave, Nscale, and Nebius, and is now reviewing them one by one. It won’t exercise the option to expand Nscale’s Texas project by about 700 megawatts; the existing 240 megawatts remain unchanged. It has already pulled out of its flagship project in Loughton, Essex, UK, worth about $3 billion. Local power won’t be available until the 2030s. Waiting for power. Amazon moved earlier: internal emails show AWS is taking delivery ahead of schedule under a new process. About $5 billion in GB300 racks arrived in August, followed by roughly $3 billion more each month. Some data centers have room for the racks but not enough power, so the machines are sitting in intermediate warehouses. Power is the bottleneck.
Ending leases doesn’t mean Microsoft is pulling back. Last quarter, Azure revenue was $33.165 billion, up 48% year over year; commercial remaining performance obligations were $677 billion, up 73%; quarterly capital expenditure was $45.2 billion, up 30%; and free cash flow fell 27% year over year. The money is shifting toward building its own infrastructure.
The contrast with crypto is clearest here. IREN was originally a Bitcoin miner. In its November 5 quarterly report, AI cloud revenue was $200 million, up 182% quarter over quarter, with an 86% gross margin. Bitcoin mining revenue fell from $67 million to $28 million, and mining rigs are being dismantled. Its GPU hardware on the books rose from $2.04 billion to $5.82 billion, with $4.61 billion in construction in progress. This is also the company that, after Microsoft requested a network design change, pushed its $4 billion annualized revenue target from year-end to January next year, with a possible delay to the end of February.
One company, two depreciation schedules. Two clocks. GPUs are replaced every three or four years; data centers are depreciated over 20. The difference comes down to who owns the land and controls the power. That’s why it can sign five-year contracts at $220,000 per megawatt, with customers prepaying 90% of GPU capital expenditure. Short-term contracts are quoted at $40 million per megawatt. When old-card leases expire, they’re renewed at double the price, and buyers still have to queue for deliveries. The mining industry has been through this before. A new ASIC generation comes every three years, and resale value moves with coin prices and electricity costs. Platforms that lent money against mining rigs in 2021 were later crushed by falling used-rig prices. Nobody wanted to take them.
A third party offers a yardstick. On October 14, Gartner estimated that, at the current rate of spending, more than $3.5 trillion in AI infrastructure could be impaired before 2030. It would take $8.5 trillion in revenue to cover that spending plus a 12% return on investment; Gartner forecasts related revenue of at most $3.6 trillion. The gap is there.
In the markets, BTC was at $74,285–$74,406, down 2.1% over 24 hours. ETH was at $2,111, down 5.6%. AI-themed tokens didn’t all move down in unison. TAO at 218.6 was down 2.9%; FET at 0.1423 was down 1.1%; RENDER at 1.602 was up 1.8%; NEAR at 3.53 was down 5%.
Compute leasing now sells two credentials: delivery date and chip vintage. Old GPUs won’t rot in a warehouse; they’re waiting for a buyer who doesn’t care about the year they were made, and a power line that’s live.
#中本聪国际社区Baoluo币商资本 #加密货币 #ComputeLeasing
