View / AI’s financial Jenga towers start to wobble

Experts are debating the existential risks of AI, but the financial risks are already here. Financial Jenga towers that hinge on construction schedules are now being scrambled by local opposition to data centers.

The latest wobble, reported this morning by Bloomberg and confirmed by Semafor, comes from Oracle, which is seeking to delay lease payments on a New Mexico data center that is part of the massive Stargate AI buildout unveiled last year by President Donald Trump. State officials have repeatedly denied permits for the gas pipeline needed to power the project, delaying its progress by at least six months.

Timing is everything in the infrastructure buildout that powers the AI race. In an exquisitely arranged patchwork of loans, insurance policies, and milestone-triggered payments, a single element falling out of place can expose financial backers and insurers to losses that are “going to be dramatically higher than anyone is currently thinking about,” Joe Peiser, CEO of risk capital at insurance broker Aon, told Semafor’s Tim McDonnell this week.

Banks have lent $18 billion to build the New Mexico site. Below that sits $3 billion in equity from Blue Owl. It hinges on Oracle paying the rent, in full and ideally on time. And this project is just part of the $288 billion of lease obligations that Oracle carries, up sixfold from the beginning of 2025.

The nuances are important here: Oracle can defer rent but must pay the project’s carry costs in the meantime, which are only slightly lower. Deferring the start of the lease extends its end date, too, guaranteeing longer cash flows for its financial backers. With Oracle having lost more than $20 billion in stock-market value today, this appears to be penny-wise and pound foolish.

But it’s worth remembering that it was an insurer, AIG, and disputes about the timing of collateral posting that turned the 2008 crisis from a problem at a few overleveraged investment banks into a global catastrophe.