Oracle warns of catastrophic consequences as US considers banning TikTok, threatens to devastate revenue and economy

Oracle said that if they are unable to continue providing these services to TikTok and cannot quickly redeploy their capacity, their revenues and profits would suffer. Furthermore, compliance with the new law could also increase their operating expenses
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Oracle has issued a warning to investors about the significant financial impact that a potential US ban on TikTok could have. This follows the law signed by President Joe Biden in April, which makes it illegal to provide internet hosting services to TikTok unless certain conditions are met by its China-based owners, ByteDance.

In a regulatory filing on Thursday, Oracle highlighted that if they are unable to continue providing these services to TikTok and cannot quickly redeploy their capacity, their revenues and profits would suffer. Furthermore, compliance with the new law could also increase their operating expenses.

TikTok relies on Oracle’s cloud infrastructure for storing and processing data from its US users. Many Wall Street analysts consider TikTok one of the biggest customers for Oracle’s cloud services. Kirk Materne, an analyst at Evercore ISI, estimates that Oracle’s annual revenue from TikTok could be between $480 million and $800 million.

In the fiscal year ending May 31, Oracle’s cloud infrastructure business, which includes renting computing power and storage, generated approximately $6.9 billion in sales. The demand for artificial intelligence has significantly boosted Oracle’s cloud infrastructure business, contributing to a 34% increase in Oracle’s share price this year through Friday’s close.

US lawmakers have expressed concerns about TikTok posing a security threat to US users, citing China’s legal requirements for companies to share national security-related data with the government upon request. The April law gives TikTok 270 days to find a buyer or face a ban in the US, although there is a possibility for an extension.

In response to these concerns, TikTok has been actively pushing back and has filed a lawsuit to overturn the law. As part of its defence, TikTok has emphasized its collaboration with Oracle to segregate US data from ByteDance, an effort known as “Project Texas,” named after Oracle’s headquarters.

Despite the close working relationship, Oracle has traditionally been discreet about its association with TikTok and does not list TikTok among its prominent cloud customer successes. Back in 2020, when the US government first pressured ByteDance to sell TikTok to a US buyer, Oracle was among the potential buyers but chose not to comment on its relationship with the app.

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