The cost of data centers is skyrocketing! Is Oracle Corporation (ORCL.US) another bombshell?

The hidden costs of building AI infrastructure are coming to the surface. On July 18th, according to The Information, Oracle Corporation's $16.5 billion AI super campus project in New Mexico is facing obstacles in environmental approvals, forcing a switch in the power supply plan and causing costs to increase by several billion dollars. At the same time, the company's data center project in Wisconsin is facing an additional compliance expense of over $100 million. Last week, S&P Global, Inc. downgraded Oracle Corporation's long-term issuer credit rating to just above investment grade, citing "continued underestimation" of its capital expenditure scale. This series of events reflects the common dilemma facing the entire tech industry in the construction of large-scale AI data centers: environmental resistance, water resource disputes, tightening regulations, and community approval costs are repeatedly breaking original financial forecasts. Forced switch in power supply plan leads to billions in increased costs Oracle Corporation originally planned to build a natural gas power plant for its "Project Jupiter" data center campus. The project is located near the border city of El Paso, Texas, in New Mexico, covering 1400 acres with a design capacity of over 2 gigawatts, mainly serving OpenAI's computing needs. However, the state environmental permit application for the natural gas power plant became stalled due to air pollution and greenhouse gas emissions issues. In April of this year, Oracle Corporation decided to use Bloom Energy's natural gas fuel cells to power the entire campus. Fuel cells have fewer emissions, slightly lower carbon emissions, and consume almost no water, theoretically giving them an advantage in environmental approvals. But this change comes at a high cost. Analysts estimate that the fuel cell microgrid with a capacity of 2.45 gigawatts will cost about $8 billion, several billion dollars more expensive than the original natural gas turbine plan. In addition, if the fuel cells do not run continuously, they will age faster, limiting Oracle Corporation's flexibility to switch to cheap CECEP Solar Energy when sunlight is plentiful. Environmental resistance has not dissipated. Last week, New Mexico rejected the proposed fuel pipeline route for the second time, with the state's environmental agency announcing a public hearing on October 19th about the air permit, citing "significant opposition." The state attorney general of New Mexico is investigating residents' complaints that their names were used for support letters submitted to regulatory agencies without their consent. Local media Source NM points out that the greenhouse gas emissions from just the facility's fuel cells exceed the total reported emissions of the state's two largest cities. An Oracle Corporation spokesperson stated in a statement that the company is "rapidly advancing" in AI site construction and is "confident in the return on the capital deployed." Oracle Corporation's infrastructure planning and procurement head Julia Robin wrote an open letter in a local newspaper, stating that the adjustments made show "we are listening and continuously improving the project." Wisconsin regulatory ruling adds over a billion dollars burden In Wisconsin, Oracle Corporation is also facing unexpected compliance costs. Despite Oracle Corporation, OpenAI, and Microsoft Corporation previously pledging to "bear all electricity-related costs" for their respective AI projects, a recent ruling by the state's electricity regulatory agency may still require these companies to pay more. The regulatory agency's ruling on the cost sharing of transmission costs may mean that Oracle Corporation, OpenAI, and their development partner Vantage Data Centers will have to bear the entire construction cost of the transmission lines for their Port Washington data center campus, instead of expecting the public to share some of the costs as previously anticipated. In addition, Oracle Corporation has also filed a lawsuit against another regulatory ruling. The ruling requires Oracle Corporation to provide financial guarantees in the form of cash or credit lines, citing its credit rating being relatively lower than other tech giants. Oracle Corporation stated that this ruling will cost them an additional approximately $100 million annually. This article is reprinted from "Wall Street News", author: Li Jia; GMTEight editor: Yan Wencai.