Oracle intended to lease up to 100,000 advanced artificial intelligence chips to Tencent for 5 years. The contract, worth about 7 billion dollars, guaranteed the Chinese developer access to power that is difficult to obtain in Israel. According to the Financial Times on November 4, the agreement was canceled after US officials contacted Oracle. Reuters could not independently confirm this information. In the newspaper story, political control overtook computing even before the Chinese border.
The equipment was to remain in data centers in Southeast Asia. Tencent will receive the results of its work through cloud services. Stopping the supply of the chip to China and preventing a Chinese company from using the same chip abroad are different tasks. The pressure on the American operator connects them: to limit access, it is enough to influence the owner of the computing site. A successfully chosen foreign territory no longer guarantees a quiet life for a long-term agreement.
Tencent's need for power is growing along with the advancement of Chinese models. The Stanford 2026 AI Index saw the lead of the top American model shrink to 2.7% by March, based on Arena Ratings. The Chinese and American systems have changed places several times. Success in response quality creates the next request. Serve many users without long waits. A good model is more useful when it can be launched en masse. The cancellation of large leases specifically affects the transition from a competitive answer to a large service.
In the second quarter, Tencent brought capital expenditures to 52.8 billion yuan, up 176% from last year. The company separately reported large upfront payments for computing. Without them, free cash flow would have been plus 37.6 billion yuan instead of the actual minus 13.8 billion. The difference is 51.4 billion yuan. The recipients of the advances were not disclosed, and this amount cannot be attributed to Oracle.