Oracle cancels $7 bn chip deal with Tencent amid US pressure: Report

The Treasury Borrowing Advisory Committee stated that circular financing in AI is intentional, with tech capital spending expected to reach $1 trillion this year and $1.7 trillion by 2027. The cost of insuring debt for companies like Amazon, Oracle, and CoreWeave has increased significantly, with Oracle's insurance costs surpassing 2008 financial crisis levels.

Oracle (ORCL) trades at $126.21, with an average price target of $234.10, implying 85.5% upside. The company raised $20B via stock and notes, following a similar raise earlier. Q1 revenue beat estimates at $19.34B, with cloud infrastructure revenue up 121%. Analysts are bullish due to a $664B backlog, but concerns include negative free cash flow and high liabilities. ORCL is down 34.39% YTD, underperforming the S&P 500.

Stock futures rose premarket after Democrats took control of Congress. Renewable energy and healthcare stocks gained, while AI-linked and Texas-based companies like Tesla (TSLA) and SpaceX fell. Oracle (ORCL) and Nvidia (NVDA) also declined on data center concerns. Trump Media & Technology Group (DJT) shares dropped 11%.

Oracle reportedly dropped Tencent as a cloud client, losing a multi-billion-dollar contract due to US export controls and pressure from officials. Tencent is expanding its cloud capacity and focusing on domestic Chinese chips. Oracle maintains contracts with ByteDance and is a major partner of OpenAI. Tencent plans to launch a cloud region in Malaysia and expand globally. Nvidia has reportedly instructed partners to reduce exposure to Chinese customers.

Oracle reportedly canceled a $7 billion deal to lease AI chips to Tencent, according to the Financial Times. US officials raised concerns about the agreement, which involved 100,000 chips over five years. The cancellation follows increased US scrutiny of China's access to advanced computing hardware.

Oracle (ORCL) stock fell 4.33% amid concerns over enterprise software demand and cloud competition. The company plans a $20B capital raise, including $10B in common stock and $10B in senior notes, with the stock offering priced at an 11% discount. Traders are focused on dilution and leverage risks, while the company's fundamentals remain strong. Recent data breaches and AI sector pressures add to market uncertainty.