TikTok Stays in America: The $500 Billion Stock Behind the Deal Investors Need to Know

To the relief of over 200 million American users, the popular social media platform TikTok has struck a deal to create a new American company that will keep it alive and well.

A new U.S. joint venture backed by several large investors will be formed, with a seven-member board of directors composed mainly of U.S. members. TikTok nearly got banned in the U.S. after a bipartisan law passed in 2024 required the platform's parent company, the China-owned ByteDance, to transfer ownership. U.S. lawmakers were concerned about national security and privacy.

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Major investors behind the new venture include MGX, an Abu Dhabi-based investment company; the large private equity firm Silver Lake; and the large public company Oracle (NYSE: ORCL), each of which will own 15% of the new venture.

And this is the $500 billion stock that investors need to know about. Market watchers have likely heard of Oracle, given its long history of providing cloud solutions and its more recent emergence as a major supplier of AI data centers.

In recent months, Oracle has signed several massive contracts to supply data centers for large hyperscalers. The stock has whipped up and down as investors have tried to figure out the likelihood of all these contracts coming to fruition and what returns will look like. The company's investment in the new TikTok venture might seem like an odd move, but it solidifies a key customer.

A key source of revenue diversity

Oracle has served as TikTok's data provider since 2020, so this new deal solidifies Oracle's existing business with TikTok and also names Oracle as TikTok's "trusted security partner."

The deal is important because the company has faced significant scrutiny in recent months over its emerging AI data center business, so solidifying a large customer that is different in that it's a social media company driven by significant consumer traffic is a positive for the company. TikTok is also an incredibly valuable private company, so if it ever goes public or gets acquired, Oracle could benefit financially as well, given its stake.

Oracle has been one of the most controversial AI companies in the stock market. The company's September earnings report sent the stock soaring when Oracle revealed over $450 billion in remaining performance obligations tied to new AI data center contracts with companies like OpenAI.

However, since then, investors have been concerned about the company taking on significant debt to build these data centers, whether OpenAI can fund all of its existing contracts, and what kind of margins Oracle can generate in this business. There are also broader concerns about OpenAI's future, which have leaked into companies connected to the hyperscaler.

If OpenAI and the broader artificial intelligence sector continue to perform well, Oracle is likely to benefit. However, if the sector hits a wall or OpenAI can't fund all of its obligations, Oracle will have just invested significantly and taken on a ton of debt. Some of these risks have likely been priced into the stock, but Oracle remains a high-risk, high-reward investment.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.