- Oracle has walked away from its Tencent deal. Oracle scrapped a five-year contract to give Tencent access to as many as 100,000 advanced AI chips across data centers in Southeast Asia, after US officials approached the company with concerns, according to two people familiar with the matter cited by the Financial Times. The deal was worth an estimated $7 billion.
- It was Tencent’s biggest overseas leasing deal. The contract, first reported by the FT in September, would have given Tencent access to chips it cannot use in China because of curbs from both Washington and Beijing. The $7 billion over five years works out to about $1.4 billion a year by our calculation.
- Pressure came from both capitals. Top officials in Guangdong, where Tencent is based, also visited the company and asked it to support domestic Chinese chips, one of the people said. Oracle, Tencent and the White House did not immediately respond to requests for comment.
- The squeeze on US cloud providers is widening. Overseas leasing deals are still allowed under current rules, but US companies face growing pressure to cut exposure to Chinese customers. The FT reported on Tuesday that Nvidia has told cloud clients they must now sell at least 51% of their services to non-Chinese companies.
What Happened?
Oracle, led by Larry Ellison, had signed the five-year lease with Tencent to supply advanced AI chips from data centers in Southeast Asia. After US officials raised concerns about the deal, it was cancelled, the people said. Chinese tech groups have turned to overseas computing capacity because of a shortage of domestic supply and tighter US export controls. These leases can also give them access to Nvidia’s most advanced processors, which are not available in China, mainly for training models because domestic chips cannot yet handle that work.
Why It Matters?
The cancellation shows that Washington is now policing how AI chips are used abroad, not just where they are shipped. That creates revenue risk for US cloud providers whose Asian data centers serve Chinese customers. ByteDance and Alibaba remain the biggest clients of Southeast Asian data centers, and Oracle is a major supplier to ByteDance in Asia, with multiple data centers in Malaysia. Tight export controls have pushed up prices, lengthened terms and raised upfront payments for these leases, so losing Chinese demand could also change the economics for capacity built to serve it.
What’s Next?
Investors should watch whether US officials apply similar pressure to Oracle’s ByteDance business in Malaysia and to other cloud providers leasing capacity to Chinese AI labs. Nvidia’s new rule requiring at least 51% non-Chinese sales could force more contracts to be reworked. Oracle has not commented, so any update on whether the cancellation affects its reported backlog will be closely watched. In China, Beijing’s push for domestic chips adds pressure on Tencent to rely more on local hardware as it builds out its Hunyuan models.
Affected Tickers and Coins: ORCL, NVDA
Source: Financial Times
