Why Is ORCL Stock Sliding Overnight?

The reported development highlights the rising tensions for U.S. cloud providers serving Chinese AI companies.
The deal was also supposed to help Oracle diversify its customer base beyond a handful of clients.
Oracle is currently in the process of raising $20 billion by issuing new equity and bonds.

Oracle Corp. (ORCL) shares fell more than 2% in overnight trading ahead of Wednesday after a report said that it had canceled a multibillion-dollar chip leasing deal with China’s Tencent.

Oracle abandoned the contract after bowing to pressure from the Donald Trump administration, signaling rising tensions for U.S. cloud providers serving Chinese AI companies, the Financial Times reported, citing unnamed sources.

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ORCL stock was also pressured by an unexpected sweep by Democrats in the midterm elections, especially noted data center critic Rep. Gina Hinojosa winning the governor race in Texas.

Under the contract, first reported by the FT in September but never formally announced by the companies, Oracle would offer Tencent access to about 100,000 advanced AI chips across data centers in Southeast Asia for five years.

At the time, the deal was reported to be Tencent’s largest overseas lease and would have given it access to advanced AI chips restricted in China by U.S. export controls and Beijing’s policies.

The deal was also supposed to help Oracle diversify its customer base beyond a handful of clients. Oracle’s overreliance on cloud contracts with OpenAI is frequently cited as a risk to the Big Red.

Oracle is a major supplier to ByteDance in Asia with multiple data centers in Malaysia, the FT reported. The company also hosted U.S. customer data for the Chinese group’s social media platform TikTok before joining a consortium that late last year acquired the reel-based app’s U.S. operations.

Oracle’s Financial Position

Investors are scrutinizing Oracle’s fundraising, much of which relies on debt, as it builds data centers and infrastructure to support new AI computing contracts it has secured.

Oracle is currently in the process of raising $20 billion by issuing new equity and bonds.

Oracle’s first-quarter revenue rose 30% to $19.35 billion, exceeding Wall Street projections of $19.14 billion, according to results issued in September.

Oracle booked more than $30 billion in additional AI cloud contracts in the quarter, increasing its remaining performance obligations, or backlog, to $664 billion. During the quarter, the company completed a $20 billion at-the-market equity offering.