Oracle (NYSE: ORCL) swung from $11.8 billion in positive free cash flow in fiscal 2024 to negative $23.7 billion in fiscal 2026, leaving it with little room for disruption.

That financial fragility is now colliding with a Washington policy move that threatens a meaningful slice of the company’s Asian data center business.

The Commerce Department is finalizing a rule that would prohibit Chinese companies from remotely accessing American AI chips housed in foreign data centers, according to a report by The Information.

Malaysia, where Oracle operates several data centers serving ByteDance, is among the roughly seven countries the rule would reportedly cover.

Unlike Nvidia, which sells chips and collects revenue upfront, Oracle owns the capacity that Chinese customers rent, meaning it absorbs the financial risk if those customers are forced out.

Bloomberg News reporter Mackenzie Hawkins, speaking on the Odd Lots podcast, put it plainly: “This is sort of nightmare scenario for NVIDIA if remote access were to be restricted. It’s also a nightmare scenario for some hyperscalers like Oracle that counts, you know, Chinese offtakers as a significant portion of its business.”

Washington did not wait for the rule to act, having already pressured Oracle to cancel a five-year, $7 billion agreement with Tencent that would have supplied up to 100,000 advanced AI chips through Southeast Asian data centers.

The Financial Times reported that deal on Nov. 4, noting it was legally permissible before U.S. officials raised objections and Oracle walked away.

At roughly $1.4 billion annually, the Tencent contract represented about 1% of Oracle’s $664 billion in remaining performance obligations as of Aug. 31, a figure that suggests limited direct exposure but does not capture the full scale of its Chinese customer base.

OpenAI alone reportedly accounts for approximately half of that backlog, underscoring how concentrated Oracle’s growth story has become around a small number of anchor tenants.

Total debt, including leases, has climbed from $75.9 billion in fiscal 2022 to $167 billion in fiscal 2026, and S&P rates the company BBB-, a single notch above junk territory.

Microsoft compounding the pressure by winding down a 2023 arrangement to rent older Nvidia chips from Oracle adds another variable to an already strained capacity picture.

Oracle does have operational buffers: GPU utilization hit 97.9% last quarter, and chips coming up for renewal have commanded a 20% premium, suggesting strong underlying demand that could attract replacement tenants.

CFO Hilary Maxson has outlined a roadmap to positive free cash flow in the second half of fiscal 2028, with projections exceeding $30 billion by fiscal 2029, and Wall Street consensus still anticipates revenue nearly tripling from $67.4 billion this fiscal year to $184 billion by fiscal 2029.

Finding substitute renters takes time, however, and with free cash flow deep in the red, time is the one resource Oracle can least afford to waste heading into its mid-December earnings report.