Oracle Tencent GPU Deal Tests the Limits of U.S. Chip Controls

Oracle shares fell 5% after OpenAI clarified its annualized revenue at $50B, below prior reports of $68B. Oracle, a major cloud provider to OpenAI, is investing heavily in AI infrastructure, with capital spending rising to $28.5B in Q2. The company is exploring debt financing to support its AI investments, with long-term debt nearing $160B. OpenAI reported 77% total run rate growth in Q3, but concerns about AI revenue sustainability weighed on related stocks.

Oracle reported a $664 billion contract backlog, up from $455 billion a year ago, with only 13% expected to convert to revenue in the next year. The increase was driven by large cloud contracts. Oracle has a $300 billion computing deal with OpenAI starting in 2027, but its realization depends on OpenAI's revenue growth. Meanwhile, Broadcom, Oracle, and SpaceX are seeking significant financing for AI chip purchases.

Oracle Health's 2025 breach of its legacy Cerner system exposed data of 20M people, including 3M Texans, per Texas AG. Affected data included SSNs, addresses, and medical info. The breach was linked to unsecured legacy servers. Oracle faces a federal class-action lawsuit for alleged negligence and delayed notifications, with a judge ruling that healthcare providers share liability. Oracle has not publicly commented.

Oracle Health disclosed a 2025 breach of old Cerner servers, exposing data of nearly 20 million people, including 3 million Texans, according to a Texas attorney general report. The breach, involving Social Security numbers and medical information, occurred on legacy servers not yet migrated to Oracle Cloud. Oracle declined to comment on the total number affected, and hospitals are responsible for notifying patients. The FBI is investigating the theft and extortion attempts linked to the breach.

Oracle (ORCL) rose 5% after announcing progress on its AI data center and new AI platforms. Mizuho raised its rating and price target to $320, citing a $638B AI cloud backlog. Director Stephen Rusckowski bought 25,000 shares for $3.48M, signaling confidence. The company aims for 35% annual revenue growth from 2026 to 2030.

Oracle reportedly signed a $7B, 5-year deal with Tencent for 100,000 AI accelerators in Southeast Asia, avoiding restrictions on advanced AI equipment. Tencent may pay $2.1B upfront. The processors' identity is unspecified, but options include Nvidia or AMD. Tencent plans to use the capacity for AI model training and inference, potentially offering excess through Tencent Cloud. The deal highlights challenges in U.S. semiconductor export controls. Neither company has confirmed the agreement.