Oracle's stock leaps on TikTok deal, but a major concern persists

By Victor Reklaitis

Questions about potential Chinese influence haven't gone away

What's the latest on the Trump administration's TikTok deal?

Trump administration officials on Monday talked up the TikTok deal that they've helped arrange and provided more details about the deal's terms, but they continue to face some skepticism.

Oracle Corp. is slated to serve as a security provider for the U.S. version of the social-media platform while being among the American investors in it, a senior White House official told reporters.

Shares in the cloud-computing giant (ORCL) closed higher by 6%, as investors also digested news that it's getting new leadership.

Oracle is likely to score $1 billion to $2 billion in additional annual revenue through the deal, though there is a danger that the new arrangement with TikTok won't get executed effectively, analysts at William Blair said in a note. TD Cowen analysts also sounded upbeat about the arrangement, saying there could be "stickier and stronger revenue growth" for Oracle, which has long counted TikTok as one of its largest cloud customers. They also said the video-sharing app would be a "highly strategic growth asset."

In describing Oracle's role as TikTok's security provider in the U.S., the senior White House official said the company would fully inspect and retrain TikTok's content-recommendation algorithm on American user data. The official also said the algorithm would be continuously monitored to make sure it's not being used for any malicious purpose.

White House Press Secretary Karoline Leavitt made the same point later in the day, telling reporters during a briefing that TikTok's algorithm "will be secured, retrained and operated in the United States - outside of ByteDance's control."

Control over TikTok's algorithm, often called the app's secret sauce, has been a big sticking point in the dealmaking over the app. Supporters of a bipartisan law targeting TikTok that was enacted last year have stressed that the platform's algorithm is required to be no longer connected to TikTok's Chinese parent company, ByteDance, for national-security reasons. Some of them weren't sounding won over on Monday.

Trump administration officials are maintaining that the new American owners of TikTok's U.S. business will have control over the algorithm, but "fundamentally they don't, because a license agreement means that there's a licenser and a licensee, and ownership of that algorithm is with the licenser - and that is ByteDance," said Michael Sobolik, a senior fellow at the Hudson Institute, a conservative think tank.

"I have not seen any evidence that would lead me to believe that this licensing arrangement would eliminate ByteDance's ability to manipulate content on the algorithm," he said. "They're claiming that Oracle will be able to track that in real time and identify it. Maybe they can, maybe they can't - I'm skeptical of that. But having the ability to track what it's doing is great, but that's not the same thing as controlling it, and as long as you're licensing something, you do not own it.

"Congress writ large has been unhappy about what the White House has been doing with this deal, but they also haven't been applying any sort of meaningful pressure. And at this point, if members are really concerned, the time to speak up is now," Sobolik added.

Ryan Fedasiuk, a fellow at the conservative American Enterprise Institute, expressed similar caution.

"If the licensing deal comes with veto rights or strings attached, or if ByteDance retains any ability to approve modifications or push updates, then the deal would not seem to meet the standard of independence required under the law," Fedasiuk told MarketWatch in a statement.

"Retraining on localized data could help address risks to U.S. user data, but algorithmic monitoring is only as strong as the auditors and enforcement mechanisms behind it. The real test will be whether Congress and the public are given visibility into the details, and whether enforcement mechanisms actually prevent Beijing from exerting influence over the platform."

Another analyst, Bloomberg Intelligence's Matt Schettenhelm, was a bit more optimistic about the TikTok deal's details.

"Of all the administration's actions on the TikTok ban, this sounds like it could be the most legally defensible," Schettenhelm told MarketWatch in an email. Reports "seem to signal that ByteDance and the new entity won't be cooperating on the algorithm's operation," he said, and if the TikTok deal actually precludes them from that, legal challenges will be difficult since the law says the president determines whether the divestiture has followed the rules.

Last year's bipartisan law aimed to ban TikTok in the U.S. as of Jan. 19 of this year. But President Trump has repeatedly order the Justice Department not to enforce it, giving his administration more time to make a deal that keeps the app operating in the U.S. Analysts have said those Trump orders do not appear to be on solid legal ground.

Rep. John Moolenaar of Michigan, a Republican who chairs the House Select Committee on the Chinese Communist Party, said in a statement last week that he is "concerned the reported licensing deal may involve ongoing reliance by the new TikTok on a ByteDance algorithm and application that could allow continued CCP control or influence."

When asked for comment Monday, a spokesman for Moolenaar said the TikTok deal isn't finalized yet and pointed to the committee chairman's statement from last week.

Next steps for the TikTok deal include Trump signing a new executive order later this week, according to the senior White House official. The order will provide 120 days to close the deal, and will declare that the terms of the deal meet America's national-security needs and that there will be a qualified divestiture, the official said. Another upcoming step is ByteDance signing a framework agreement with one or more of the new American investors.

Emily Bary contributed.

Related: Trump says Murdochs and Michael Dell could potentially take part in TikTok deal

-Victor Reklaitis

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09-22-25 2155ET