Oracle Invokes Force Majeure on Its $165 Billion Stargate Campus in New Mexico, Rattling Investors in the AI Build-Out

One of the flagship projects of America's artificial intelligence build-out has hit a new complication, and investors are paying attention.

Oracle has sent a force majeure notice to the developer of Project Jupiter, a vast data-centre campus under construction in New Mexico that forms part of the Stargate AI infrastructure initiative, Bloomberg News first reported on Thursday, September 24. The notice was sent to a unit of Blue Owl Capital, the investment firm backing the project's development, according to Bloomberg, Reuters and CNBC.

Oracle's shares fell about 4% after the report, and Blue Owl's shares also declined.

What a force majeure notice means

Force majeure clauses, common in energy, commodities and construction contracts, excuse a party from certain contractual obligations when events beyond its control prevent it from performing.

In this case, according to Bloomberg's sources, Oracle is not trying to walk away from the project or exit as its main tenant. Instead, it is seeking to preserve the right to delay payments if the data centre is derailed and fails to come online in 2028 as planned.

A person familiar with the project's terms told another outlet that the dispute centres on when the project's more expensive lease phase would begin, rather than on whether the project will proceed. The same source said Oracle is contractually responsible for providing power to the facility and cannot terminate the lease.

Oracle moved quickly to play down the significance of the notice. "Project Jupiter remains on our planned schedule," the company said in a statement to CNBC. "We are fully committed to New Mexico and confident in our path forward." An Oracle spokesperson added that force majeure notices "are commonplace in developments of this scale and are often used to preserve contractual rights".

Blue Owl also sought to reassure investors. "This notice does not change the financial commitments to this multi-year project," the firm said in a statement to CNBC.

A project on an enormous scale

Project Jupiter is one of the largest AI infrastructure projects in the world. Located on a 1,400-acre site in Doña Ana County in southern New Mexico, near the US–Mexico border, the campus is designed to draw 2.45 gigawatts of power, enough electricity to supply roughly 1.8 million homes at any given moment, according to Bloomberg. Its total cost could reach $165 billion, according to reports.

The campus is part of Stargate, the AI infrastructure initiative that Oracle, OpenAI and SoftBank announced alongside President Donald Trump early in his second term. OpenAI is the ultimate customer for the computing capacity, under a broader agreement with Oracle and SoftBank to develop several US data centres. Stack Infrastructure, a Blue Owl portfolio company, is developing the site, and funds managed by Blue Owl have committed equity. The project has secured about $18 billion in loans from a consortium of banks, according to media reports.

The power problem

At the heart of the difficulties is energy. Project Jupiter was designed to run on as much as 2.45 gigawatts of Bloom Energy fuel cells powered by natural gas. Getting gas to the site has proved difficult.

The New Mexico State Land Office rejected rights-of-way for a supply pipeline in March, and a key natural gas pipeline developed by Energy Transfer, which was supposed to begin service in September, has been delayed by nearly six months to February, according to Bloomberg Law. The project has also faced legal challenges to permits related to water supply and air quality.

The campus has drawn opposition from local residents and environmental groups and has become a political flashpoint ahead of the US midterm elections. Oracle has responded with a public outreach campaign in the state aimed at winning over critics, according to Bloomberg.

Why investors reacted

The notice lands at a sensitive moment for Oracle. The company has transformed itself into one of the most aggressive builders of AI computing capacity, backed by enormous contracts. It has reported remaining performance obligations of about $664 billion, largely tied to AI cloud agreements, and booked more than $30 billion in new AI contracts in a single quarter, according to 24/7 Wall St.

But that growth has come at a heavy cost. According to a recent regulatory filing reported by Quartz, Oracle's capital expenditure rose to $28.5 billion in the quarter ended August 31, from $8.5 billion a year earlier. The company reported negative free cash flow of $5.4 billion for the quarter and has said it plans to raise about $40 billion through a combination of debt and equity in its current financial year.

For investors, the question is not whether demand for AI computing is real. It is whether the physical infrastructure — power, land, permits and pipelines — can be delivered fast enough to turn contracts into revenue before the financing costs become a burden. A force majeure notice on a flagship site, however routine Oracle says it is, puts that question front and centre.

Debt tied to the project's financing has reportedly traded below 90 cents on the dollar, a sign that some lenders were already pricing in risk before Thursday's news.

A wider warning for the AI build-out

Project Jupiter's troubles reflect challenges facing AI data-centre construction across the United States. Developers are competing for limited grid capacity, turning to on-site gas generation and fuel cells, and facing growing resistance from communities concerned about water use, air quality and electricity prices.

The timing is also difficult. US Treasury yields reached their highest levels since 2007 on the same day, raising the cost of financing capital-intensive projects. Chipmakers and cloud companies have been issuing large amounts of debt to fund AI infrastructure, and investors are becoming more sensitive to execution risk.

Suppliers are watching closely too. Bloom Energy, whose fuel cells are planned for the site, has been one of the biggest beneficiaries of AI-driven power demand, and any delay at Project Jupiter would affect expectations for companies across the supply chain.

What happens next

Several milestones will determine whether Project Jupiter stays on track: the completion of the gas pipeline, resolution of permitting challenges, and progress on construction. Oracle will also face questions from investors in its next earnings update about how the notice affects its financial obligations and its revenue timeline.

For the global technology industry — including the many Indian and diaspora engineers who work in cloud and AI infrastructure — the episode is a reminder that artificial intelligence ultimately runs on very physical foundations. Chips, contracts and capital are necessary, but without power, pipelines and public consent, even the most ambitious AI projects can stall.