Oracle Cancels $7 Billion AI Chip Leasing Deal With Tencent

Oracle has cancelled a $7 billion contract to lease up to 100,000 AI chips to Tencent after officials from the Trump administration raised the deal directly with the company, the Financial Times reported, citing people with knowledge of the matter.

The chips are not available in China. They sit in data centres throughout south-east Asia, and the five-year arrangement would have given Tencent access to them without moving any hardware across the Chinese border. Whether any money changed hands before the cancellation remains unclear, though earlier FT reporting said Tencent had agreed to pay roughly 30 per cent of the deal's value up front.

Two people familiar with the matter told the FT that US officials approached Oracle with concerns about the transaction. One of those sources said Chinese officials had separately urged Tencent to back domestic chipmakers rather than Western suppliers. In plain terms, both governments pushed in the same direction: away from the deal.

Why did the deal exist at all?

Tencent is China's largest tech company and the world's largest video game company, with revenue of 751.766 billion yuan ($109.4 billion) in 2025. Despite that scale, it has fallen behind rivals in AI. Alibaba's Qwen is now one of the leading open-source models, and smaller firms such as DeepSeek and Moonshot AI have released frontier models of their own.

The Chinese government has repeatedly urged AI labs in the country to use chips made by Huawei. That push has limits. The Chinese AI ecosystem is largely built on Nvidia's proprietary CUDA platform, and Huawei is struggling to meet local demand, so cutting reliance on American silicon has proved difficult.

Blocked from buying the latest Nvidia chips outright, prominent Chinese firms have turned to leasing data centre capacity in south-east Asia instead. Oracle already has several such deals with Alibaba and ByteDance, according to the report. The takeaway: the leasing route was a workaround for export controls, and Washington has now closed this instance of it.

What pressure did the US apply?

US officials have worked for some time to limit China's access to the most advanced AI chips and have warned that Chinese developers smuggle GPUs into the country. The enforcement record is concrete:

• In July, Nvidia halved its list of approved Asian customers, citing smuggling concerns.
• This week, Nvidia ordered its data centre partners to reduce their exposure to China.
• In this case, administration officials went directly to Oracle before the deal collapsed.

That sequence shows the mechanism at work. Export rules control what can be shipped; direct intervention from officials controls what can be leased. A deal that kept the hardware outside China still drew objections, which signals a broadening definition of restricted access.

What does the cancellation change?

For Oracle, the lost contract removes a reported $7 billion in committed leasing revenue and sets a precedent that could complicate its other arrangements with Chinese cloud customers in the region. For Tencent, the cancellation narrows an already thin set of options: domestic Huawei chips remain supply-constrained, and direct purchases of top-end Nvidia hardware stay off the table.

The reported 30 per cent up-front commitment, valued at roughly $2 billion on a $7 billion deal, leaves an open question about payments already made. The FT could not establish whether any payment had been transferred before the cancellation.

Both companies now face a narrower path. Oracle must weigh its south-east Asian leasing business against Washington's tolerance, and Tencent must accelerate a domestic chip transition that Beijing has demanded but the market has so far failed to deliver at scale. Expect further scrutiny of similar leasing arrangements with Alibaba and ByteDance as US enforcement tightens.