Oracle Has Reportedly Signed a $7 Billion Deal with Tencent. it Could Provide Relief for the Troubled Stock.

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Oracle shares rose nearly 2% in premarket trading.

Oracle's stock has been on the decline this year, but its new reported deal with China's Tencent could come as a positive signal for investors.

A Shenzhen-headquartered technology giant, which owns popular social media and payment platform WeChat, has reportedly signed a deal worth about $7 billion to lease 100,000 artificial-intelligence chips from the U.S. cloud infrastructure provider, according to two people familiar with the matter, who spoke to the Financial Times.

Tencent and Oracle did not immediately respond to MarketWatch's requests for comments.

Tencent has agreed to a five year-lease across a number of data centers operated by Oracle in southeast Asia, The deal has meant Tencent is able to access approximately 100,000 AI chips which were not previously available in the country, the people said. One of the people also told the newspaper that the agreement is worth around $7 billion, including an immediate payment of about 30%.

Oracle's stock (ORCL) rose almost 2% in premarket trading, while shares in Tencent (HK:700) fell 0.2% in Hong Kong.

News of the deal comes amid a difficult year for Oracle, with shares down over 50% since the highs reached in September of last year, when enthusiasm for companies connected to the artificial-intelligence trade heightened.

However, in recent months, Wall Street has grown increasingly worried about the software giant's AI investments. Oracle announced in September that it would be increasing its restructuring costs by $700 million as part of its transformation to better incorporate AI tools into its business and to meet demand for its cloud services.

At the same time, the company has faced scrutiny over the health of its balance sheet as that boost in spending has added to its debt, with negative free cash flow of $5.4 billion in the most recent quarter.

In a note last month, JPMorgan analysts said there are concerns about how quickly Oracle is translating orders into revenue, given the backdrop of data-center delays.

But the news of the deal may also bring mixed reactions, as officials in Washington and Beijing have expressed concerns about AI chip agreements between the two countries over national security worries and as both compete to dominate in the sector.

China has imposed strict controls on domestic companies purchasing AI chips from abroad, while the Trump administration has reversed a ban on exporting chips to China.

In July, Nvidia (NVDA) began sending limited shipments of its H200 chips to mainland China.

-Nora Redmond

 

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