Overseas chip leasing remains legal under US rules, yet Washington stopped this deal by pressing Oracle, a precedent for ByteDance and Alibaba, the biggest Chinese renters in Southeast Asia.
Oracle has cancelled a five-year chip leasing contract with Tencent after the Trump administration raised concerns about it, the Financial Times reported on November 4. The deal, worth an estimated US$7 billion, would have given the Chinese company access to as many as 100,000 advanced AI chips across Oracle data centers in Southeast Asia. US officials approached Oracle about the contract, according to two people familiar with the matter cited by the newspaper, and the deal has since been cancelled. Oracle, Tencent and the White House did not immediately respond to the FT’s requests for comment, and Reuters said it could not immediately verify the report.
Pressure came from Beijing as well. Senior officials from Guangdong, the province where Tencent is based, visited the company and asked it to support domestic Chinese chips, according to one of the people the FT spoke to. That puts the cancellation at the meeting point of two policies: Washington’s effort to keep leading-edge compute away from Chinese AI developers, and Beijing’s push for its largest technology groups to buy Chinese processors.
Neither company has confirmed the cancellation, and the reports do not say whether Tencent had begun using any of the capacity or which chips the contract covered. EastFrontier reported in October that Tencent had turned to Oracle for overseas AI compute after the FT first disclosed the agreement.
The lease was Tencent’s biggest bet on compute outside China
Tencent’s US$7 billion lease was its largest overseas leasing deal and would have given it access to as many as 100,000 advanced AI chips. Those chips cannot be used inside China because of restrictions imposed by both Washington and Beijing, the FT reported. The newspaper first disclosed the contract in September, describing a five-year lease spread across a number of Oracle facilities in the region. Tencent had agreed to pay about 30% of the contract’s value upfront, The Next Web reported, which leaves open what happens to money already paid.
Leasing capacity abroad has become a standard workaround for Chinese AI groups. Such arrangements are allowed under existing US rules, and they offer access to Nvidia processors that are not sold in China. Chinese technology companies and AI labs use them especially to train models, according to the FT, because domestic chips cannot yet handle that work. Tencent has been spending heavily to catch up in AI, and the FT said its latest Hunyuan models had narrowed the gap with Alibaba’s Qwen.
Pressure on the provider achieves what the rules do not forbid
The cancellation shows how Washington can shut a door without changing the law. The lease was legal; the leverage was over the American company that offered it. Oracle’s co-founder and chairman, Larry Ellison, is a Trump backer, and was part of the consortium that acquired TikTok’s US operations late last year, the FT noted. It also hosted US customer data for TikTok before that deal.
The episode follows other moves to limit Chinese use of offshore capacity. The FT reported on November 3 that Nvidia has told cloud computing clients they must now sell at least 51% of their services to non-Chinese companies. Tighter export controls that stop Nvidia’s advanced chips from reaching China through third countries have also pushed up prices, lengthened terms and raised upfront payments for Southeast Asian data-center leases, according to the newspaper.
For Tencent, losing the Oracle capacity raises the importance of the domestic route that Guangdong officials urged on it. The FT’s reporting says Chinese chips cannot yet do the training work that leased Nvidia capacity supports, which leaves Tencent behind ByteDance and Alibaba, the two biggest Chinese clients of Southeast Asian data centers.
ByteDance’s Malaysian capacity is the next exposure to watch
Oracle is a major supplier to ByteDance in Asia, with several data centers in Malaysia, according to the FT. Those contracts sit in the same position the Tencent deal did: legal under US rules, exposed to US political attention, and at odds with Beijing’s encouragement to buy Chinese chips. Alibaba is the other large Chinese renter of capacity in the region, the FT reported.
The next signals will come from the companies themselves. Tencent’s next quarterly results will show whether its capital spending shifts toward domestic hardware after losing the lease. An Oracle disclosure on the contract, or any similar cancellation involving ByteDance’s Malaysian capacity, would show whether this was a single intervention or the start of a wider pullback by US cloud providers serving Chinese AI groups.