Microsoft is phasing out an artificial intelligence (AI) computing partnership with Oracle Corp, choosing not to renew a 2023 agreement, Bloomberg has reported.The company has steadily deactivated rented server capacity from Oracle in recent months. These Oracle-hosted machines used older generations of Nvidia Corp. chips, which no longer meet Microsoft’s current computing requirements.The shift underscores growing industry concerns regarding hardware obsolescence. Research firm Gartner Inc. has cautioned that aggressive capital expenditures on AI infrastructure risk significant write-downs as faster, more efficient chips enter the market.For Oracle, the loss of capacity utilization exacerbates existing challenges. Substantial capital outlays for AI data center construction have driven its free cash flow into negative territory, pushing its credit rating to just one level above junk status.Neither company disclosed the financial value of the 2023 contract, which was intended to support Microsoft’s AI-powered Bing search engine. This wind-down follows an earlier Business Insider report indicating that separate negotiations to lease additional Oracle capacity failed in June this year.Microsoft is actively reviewing over $80 billion in outside cloud computing commitments from various providers, including CoreWeave, Nscale, and Nebius Group. Company executives are reportedly dissatisfied with escalating expenses and operational delays associated with these third-party agreements.The tech giant recently declined an option to expand an Nscale deployment in Texas, a deal that could have been worth tens of billions of dollars. This decision came weeks after Microsoft withdrew from a planned Nscale site in Loughton, Essex, due to power connection delays that pushed its expected supply date into the 2030s.