Oracle Walks Away From $7 Billion Tencent Chip Deal as Washington Raises Objections
Published on 11/04/2026 at 15:11 | Editorial boerse-global.de
Oracle has scrapped a five-year, $7 billion agreement to rent out AI computing capacity to Tencent after US officials voiced concerns, according to a Financial Times report. The contract would have given the Chinese tech group access to as many as 100,000 AI chips housed in Southeast Asian data centres. Shares in the US software and cloud group fell 4.1% on the news.
The abandoned deal would have seen Oracle supply computing capacity over several years. The $7 billion figure attached to the arrangement reflected its planned value, not revenue already booked.
A $20 Billion Raise, Split Down the Middle
The Tencent reversal lands in the same week Oracle filed paperwork for a $20 billion capital raise, split evenly between $10 billion of common stock and $10 billion of senior notes. Media reports said the announcement triggered a sharp slide in the share price on Monday.
The bond portion is spread across five tranches maturing between 2029 and 2046, while the equity leg enlarges the share count — a dilution effect existing holders will expect the funded growth to justify. Oracle expects the stock and note offerings to close on 4 November, subject to customary conditions, so the financing has yet to be confirmed as completed.
Should investors sell immediately? Or is it worth buying Oracle?
Sentiment turned the following day: the stock climbed 6.0% as the settled financing package eased worries about how the AI data-centre build-out would be paid for, with a friendlier tone across AI-cloud peers lending a hand. That rebound signals relief on the funding question — it does not yet confirm the economics of the expansion.
Guidance Unchanged Since Investor Day
At its investor day on 28 October, Oracle reaffirmed its outlook for fiscal 2027: at least $90 billion in revenue and adjusted earnings per share of $8.10. For fiscal 2030 it is targeting at least $225 billion in revenue and an adjusted operating margin of at least 40%.
Management also said it expects to cap additional capital-market funding for its investment cycle spanning fiscal 2027 to 2030 at $20 billion. Refinancings sit outside that limit — the pledge is not a promise to abstain from every further bond sale until then.
The cash-flow roadmap is the yardstick that matters. Oracle expects positive free cash flow in the second half of fiscal 2028 and at least $30 billion for fiscal 2029. Hit those marks and the build-out increasingly funds itself; slip, and reliance on outside capital lingers.
More Silicon, More Partners
Supporting the bull case is a widening menu of cloud offerings. On 27 October, Oracle and NVIDIA said they would scale their superclusters to multi-gigawatt capacity, with NVIDIA's Vera Rubin NVL72 and Vera processors made generally available on Oracle Cloud Infrastructure. Google TPUs are slated to be offered through OCI in calendar 2027, and Cerebras technology for AI inference is planned for this calendar year. A collaboration with OpenAI would embed Oracle applications and data in ChatGPT, while Oracle offerings would draw on OpenAI models and tools. Announcements alone, though, do not prove incremental revenue.
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On Monday, Stephens offered a more optimistic read. Analyst Brett Huff upgraded Oracle from "Equal-Weight" to "Overweight" and lifted his price target to $213 from $185.
That upgrade backs the positive interpretation without substituting for operational proof. Capital makes ambitious build-outs easier to finance, not automatically profitable: the products must find demand, margins must land, and the promised free-cash-flow turn must arrive. Should spending and cash generation diverge, the relief provided by the financing could fade — above all in a scenario where Oracle keeps investing heavily but reaches positive free cash flow later than promised.
Near term, all eyes are on the expected 4 November close. After that, attention shifts to the additional cloud capacity due in calendar 2027 and whether it converts into paying business. The question for investors is not whether Oracle can access capital. It is whether the company can turn that capital into profitable growth and free cash flow within the funding limits it has set itself.
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