Report: Tencent leases about 100,000 AI chips from Oracle for $7 billion

The Financial Times reported that Chinese company Tencent signed a five-year lease agreement for a number of Oracle data centers in Southeast Asia, granting it access to around 100,000 advanced AI chips that it cannot secure within mainland China. The deal is estimated to be worth around $7 billion, with approximately 30% paid upfront, according to unnamed sources cited by the newspaper. Tencent and Oracle have not commented on the report nor confirmed its accuracy.

This move comes at a time when the United States is restricting Chinese companies' access to advanced chips used to train and run artificial intelligence models. Chinese buyers are turning to data centers outside the country to obtain computing power that is difficult to provide locally, placing Southeast Asia in the position of an intermediary market for these capabilities.

In the same context, Tencent's capital expenditure in the second quarter rose by 176% year-on-year to reach 53 billion yuan, while the company's free cash flow turned negative by 13.8 billion yuan. This reflects growing pressure on the budget as spending on AI infrastructure accelerates.

Details of the deal remain limited, as the report relied on unidentified sources, and Oracle has not issued a statement clarifying the number of chips, their specifications, or the locations of the data centers involved. It also remains unclear whether the chips are subject to US export restrictions or intended for use outside the Chinese market.

What do these terms mean?

Advanced Chip: A high-performance electronic processor used to train and run AI models, certain types of which are subject to US export restrictions to China. Data Center: A building containing thousands of servers connected to power and network, providing computing power for rent rather than purchase. Free Cash Flow: The cash remaining with the company after deducting operating and capital expenditures; if negative, it means the company spent more than it generated. Capital Expenditure: Amounts injected by the company into long-term assets such as servers and data centers, with its impact appearing on cash flow before reflecting on revenues.