A $7 billion AI chip rental agreement between Oracle and Tencent collapsed after U.S. officials intervened directly with the cloud provider. The cancellation signals a sharp escalation in Washington’s campaign to sever Chinese companies from advanced computing power, even when that power sits in data centers outside China.
Chinese firms have increasingly rented processing capacity abroad as export controls choked off direct chip purchases. Remote access to overseas servers offered workaround access to the silicon needed for training large AI models. Now that loophole appears to be closing.
Nvidia has reportedly instructed its cloud customers to allocate no more than 49 percent of new business to Chinese companies. The requirement, communicated verbally rather than in contracts, applies to future agreements involving Nvidia chips.
Meanwhile, federal prosecutors continue pursuing criminal cases tied to illegal AI server shipments. Former Supermicro contractor Willy Sun pleaded guilty last month to export control violations, smuggling conspiracy, and obstruction. Court records describe elaborate concealment tactics, including dummy servers stocked with transferred serial stickers to fool inspectors. Prosecutors identified at least $510 million in shipments to China over just three weeks last spring.
The fallout now threatens Southeast Asia’s data center boom. Chinese tech giants anchored much of the region’s expansion. Industry sources told Caixin that 60 to 70 percent of approved data center projects in Thailand carried Chinese investment or served Chinese tech firms as primary customers. ByteDance similarly anchored a 110-megawatt campus in Malaysia’s Johor state.
Replacing that demand looks difficult. A Singapore cloud operator told the Financial Times that sufficient non-Chinese customers simply do not exist outside the United States. With roughly half of the Asia-Pacific’s 4.8 gigawatts of under-construction capacity concentrated in Southeast Asia, operators may face prolonged vacancy and delayed investment recovery.
