This article first appeared on GuruFocus .
Oracle Corp. ( ORCL , Financials ) has allegedly called off a $7 billion deal to lease artificial intelligence chips to Tencent, causing Wedbush Securities to look at political constraints underlying the move.The five-year arrangement would have given Tencent access to around 100,000 sophisticated AI chips in Oracle data centers across Southeast Asia.U.S. officials allegedly raised worries about the partnership with Oracle. In Guangdong province in China, officials also requested Tencent's help in backing homegrown chips.The firms have not officially elaborated on the decision but Wedbush claimed political concerns may assist explain the cancelation.The deal would have allowed Tencent to rent computer power outside of China, where access to some modern US chips remains limited.The termination highlights the increasing challenges that American cloud companies are facing in supplying Chinese AI customers.For Oracle, a deal of this scale represents a reduction in future revenue commitments, as the business spends a lot on data-center infrastructure.It's not clear what the financial effect will be, as Oracle has not said how it would account for the deal, or whether it received any advance payments.The next trigger will be Oracle explaining the financial implications of the purchase and its ability to acquire alternative clients for the anticipated capacity.
