Oracle (NYSE:ORCL) has cancelled a $7 billion agreement to lease advanced artificial intelligence chips to Chinese technology group Tencent (HKEX:0700), following concerns raised by US officials over China’s access to American semiconductor technology, according to a Financial Times report published on Wednesday.
The five-year contract would have provided Tencent with access to as many as 100,000 advanced AI chips housed in data centres across Southeast Asia.
The reported cancellation highlights growing restrictions on Chinese companies seeking access to US-designed AI computing technology through overseas cloud infrastructure.
Oracle, the cloud computing company led by Larry Ellison, had reportedly signed the agreement with Tencent earlier this year as part of a five-year arrangement valued at approximately $7 billion.
Under the contract, Tencent would have been able to lease computing capacity supported by up to 100,000 advanced artificial intelligence chips located in Southeast Asian data centres.
However, the Financial Times reported that Oracle terminated the agreement after US government officials expressed concerns about the arrangement.
The newspaper cited two people familiar with the matter in reporting the cancellation.
The decision represents a significant development in the market for AI computing services, where Chinese technology companies have increasingly sought access to advanced processors through international cloud providers.
The cancellation comes amid increased scrutiny from the administration of President Donald Trump over the availability of advanced American semiconductor technology to Chinese companies.
Washington has sought to maintain the United States’ technological advantage in artificial intelligence while limiting China’s ability to obtain high-performance computing systems.
Although the Oracle-Tencent agreement involved data centres located outside China, US officials reportedly raised concerns about the arrangement.
The development suggests that American scrutiny of AI technology access extends beyond direct semiconductor exports to China and includes computing capacity made available through overseas infrastructure.
The reported intervention could have implications for other cloud providers offering advanced AI services to Chinese customers.
Tencent reportedly encountered regulatory scrutiny in China over the proposed agreement with Oracle.
According to the Financial Times, Chinese authorities questioned the arrangement and encouraged Tencent to seek domestically produced semiconductor alternatives.
The reported pressure reflects Beijing’s efforts to strengthen China’s domestic semiconductor industry and reduce reliance on foreign technology.
Tencent, which operates major internet, gaming and digital services businesses, requires substantial computing capacity to develop and deploy artificial intelligence applications.
The cancellation could affect its plans to secure additional advanced computing resources through international cloud providers.
The Oracle-Tencent development follows reports of additional restrictions affecting access to advanced AI computing infrastructure.
On Tuesday, the Financial Times reported that Nvidia (NASDAQ:NVDA) had informed its cloud computing customers that at least 51% of their capacity must now be sold to companies outside China.
The reported requirement would limit the proportion of Nvidia-powered computing capacity that cloud providers could allocate to Chinese customers.
The measure reflects the increasing importance of cloud infrastructure in the broader debate over access to advanced artificial intelligence technology.
Rather than purchasing restricted chips directly, companies can potentially obtain computing resources by leasing capacity from data centres in other countries.
The latest developments indicate growing attention to this alternative method of accessing advanced AI processors.
Despite the reported cancellation of Oracle’s agreement with Tencent, other Chinese technology companies continue to maintain substantial AI computing arrangements with American providers.
ByteDance and Alibaba (NYSE:BABA) have significant chip leasing agreements involving US cloud infrastructure companies, according to the Financial Times.
Oracle remains an important supplier of computing services to ByteDance in Asia, operating several data centres in Malaysia.
These arrangements demonstrate the continuing commercial relationships between American cloud infrastructure providers and Chinese internet companies, even as regulatory scrutiny increases.
The future of such agreements may depend on how US restrictions evolve and whether additional limitations are introduced for overseas AI computing services.
The reported termination of the $7 billion contract highlights the regulatory risks facing companies involved in supplying advanced artificial intelligence computing capacity.
For Oracle, the cancellation removes a potentially substantial long-term leasing arrangement at a time when cloud providers are investing heavily in AI infrastructure.
For Tencent, the development could increase the importance of alternative computing arrangements and domestically developed semiconductor technology.
The situation also raises questions about how other international cloud agreements involving Chinese customers could be affected by changes in US policy.
As competition between Washington and Beijing over artificial intelligence technology continues, regulatory decisions may play an increasingly important role in determining how advanced computing capacity is distributed globally.
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