A dispute involving Oracle, the US tech giant that rents, equips and sublets data centres to companies such as Open AI, highlights growing legal risks in the AI data centre boom. Oracle is reportedly on the hook to lease a data centre in New Mexico that faces political and regulatory delays, potentially triggering a force majeure clause. The traded price of the $18bn of debt backing the data centre has fallen to about 90 cents on the dollar. Despite this, Oracle may still owe carry payments to investors, effectively paying for a facility without electricity.

The rush to build data centres for AI operations—projected to reach trillions by decade’s end—has spawned financial instruments like leases, residual value guarantees, and purchase commitments, much of which remains off-balance sheet. Oracle alone carries $260bn in such obligations, with its shares down 55% in the past year. Combined off-balance sheet commitments among hyperscalers—Meta Platforms, Alphabet, Microsoft, and Amazon—have risen from $350bn in 2023 to $2.8tn today, according to Moody’s.

While data centre builders tout long-term contracts with well-capitalised clients, corporate law experts note a gap between perception and reality. The outcome often hinges on who has the best legal teams and deepest pockets.