• Blackstone (BX) is exploring stepping in to potentially finance Oracle (ORCL)'s $10 billion Michigan data center project after Blue Owl Capital (OWL) withdrew from negotiations, though no formal agreement has been reached.
  • Blue Owl's exit was driven by lender demands for tougher leasing terms and concerns over construction delays, reflecting cooling sentiment around AI infrastructure investments.
  • Oracle disputes any funding impasse, stating it has selected a new equity partner from a competitive group, with final negotiations moving forward on schedule.

Funding Shakeup for Oracle's AI Expansion

Blackstone is in preliminary discussions to potentially finance Oracle's $10 billion Michigan data center project after Blue Owl Capital withdrew from the deal, according to people familiar with the matter. No formal agreement has been signed, but the talks signal ongoing efforts to secure funding for the 1-gigawatt Saline Township facility, which is part of Oracle's aggressive push to support AI customers like OpenAI.

Blue Owl Capital, which had been expected to arrange up to $10 billion in financing and contribute substantial equity, backed out of negotiations after lenders pushed for tougher leasing and debt terms as sentiment cooled around the pace of AI infrastructure investment. "The project became less financially attractive for Blue Owl," said one source, who requested anonymity because the discussions are private. Additionally, Blue Owl expressed concerns that the site could face construction delays, though Oracle has disputed this characterization.

Related Digital, the project developer, has selected a new equity partner from a competitive group but has not publicly identified them. The company stated it is in the "final stages of diligence" with its chosen partner. Oracle, in a statement, claimed Related Digital "selected the best equity partner from a competitive group of options" and that "final negotiations for their equity deal are moving forward on schedule." Attempts to reach Blackstone for comment were unsuccessful.

Financial Pressure and Lender Scrutiny

Oracle's debt has risen sharply—reaching approximately $105 billion in net debt, including lease obligations, as of November, up from $78 billion a year earlier. Morgan Stanley (MS) projects this could swell to roughly $290 billion by 2028. The company has already sold $18 billion in bonds and is seeking an additional $38 billion through U.S. banks, highlighting the financial strain of its expansion.

Lenders are imposing stricter scrutiny on Oracle compared to larger cloud rivals like Amazon (AMZN) and Microsoft (MSFT), with more onerous lease terms on Oracle projects. Lease commitments jumped from $100 billion to $248 billion in just three months, indicating significant expansion of obligations. Blue Owl had been instrumental in Oracle's prior data center expansion, backing projects including a $15 billion facility in Abilene, Texas, expected to achieve 25 percent returns, and an $18 billion campus in New Mexico.

Project Timeline and Market Implications

Construction is currently set to begin in the first quarter of 2026. The project previously faced a local rezoning rejection that led to a lawsuit, which has since been settled, clearing the way for development. The Michigan Public Service Commission conditionally approved DTE Energy (DTE)'s 1.4 GW power supply agreement in December 2025, providing a regulatory green light.

The funding uncertainty underscores growing financial and execution risks facing even the largest players competing to build AI infrastructure. The broader AI infrastructure market faces questions about whether operators are prepared for behind-the-meter power generation and meeting aggressive construction timelines in 2026. As one industry insider noted, "Without a deal, projects like this could face significant delays, but Oracle seems confident in its path forward."