The private capital group had been deep in discussions with lenders and Oracle about backing a one-gigawatt facility, but negotiations collapsed, according to three people familiar with the matter.
Blue Owl has been Oracle’s go-to financier for its largest US data centres, typically providing equity while financing the rest with debt.
The usual structure involves a special-purpose vehicle owning the site and leasing it to Oracle, allowing the software outfit to expand without paying everything up front.
That model has helped Larry Ellison’s empire promise huge slabs of computing power to AI players such as OpenAI.
With Blue Owl now backing off, funding for the Michigan site is uncertain, and Oracle has yet to lock in a replacement partner.
People close to the talks said Blue Owl would likely have arranged up to $10 billion in financing alongside a hefty equity stake.
Blackstone has held preliminary talks about stepping in, but no deal has been signed, those people said.
The wobble has sharpened concerns that Oracle’s aggressive AI build-out is colliding with market reality.
Ellison’s group has been splurging on data centres while tapping debt markets hard, unsettling investors and fuelling anxiety among analysts and ratings agencies.
Those nerves are increasingly shared by the cocaine nose jobs of Wall Street, where chatter about an AI bubble bursting has grown louder as debt piles up, and returns look less certain.
Oracle shares are down about 46 per cent from their September peak, and its bonds have also sold off. The stock closed 5.4 per cent lower on Wednesday after the Financial Times report, while Blue Owl shares dropped 2.8 per cent.
People close to the Michigan deal said lenders pushed for tougher lease terms and stricter debt conditions as sentiment soured on vast AI spending and Oracle’s rising leverage.
That shift made the deal less attractive for Blue Owl than earlier projects, according to some of those involved.
There were also concerns that the Saline Township site, being developed by Related Digital, could face delays.
In a statement, Oracle said: "Our development partner, Related Digital, selected the best equity partner from a competitive group of options, which in this instance was not Blue Owl.. Final negotiations for their equity deal are moving forward on schedule and according to plan.”
Related Digital said, “This is an exceptional project that drew significant interest from equity partners. We evaluated all of our options and selected our equity partner of choice for their unparalleled expertise in the space.”
The developer declined to name the investor, although a person close to the company said it was in the final stages of diligence.
Oracle is building the site near Ann Arbour as part of a $300 billion agreement with OpenAI to supply 4.5 gigawatts of computing power over the next five years.
The project has stumbled since its August launch, including a zoning rejection that led to a lawsuit before construction was cleared to start in the first quarter of next year.
One person familiar with Oracle’s lender arrangements said the company is now facing more onerous lease terms than rivals such as Amazon and Microsoft.
“They would rather work with a hyperscaler that has more experience and a less speculative project pipeline,” they said.
Oracle ended November with about $105 billion in net debt, including leases, up from nearly $78 billion a year earlier, and Morgan Stanley forecasts that figure could swell to around $290 billion by 2028.
The company sold 18 billion US dollars of bonds in September and is in talks to raise a further 38 billion US dollars from several US banks.
Blue Owl has been central to Oracle’s earlier mega-projects, including a $15 billion site in Abilene, Texas and an $18 billion US dollar campus in New Mexico.
Those deals lock Oracle into long leases while Blue Owl lines up third-party financing, with the Abilene site expected to become OpenAI’s first major US data centre upon completion in mid-2027.