America’s biggest cloud companies would lose millions on a TikTok ban

On By Littum

A court ruling upholding the law to divest or ban TikTok could strip many of America’s biggest cloud providers of millions of dollars in contracts with the social media company and its Chinese parent, ByteDance.

The divestment-or-prohibition law prevents companies from providing TikTok or ByteDance with “internet hosting services to enable the distribution, maintenance or updating” of their apps. Companies that violate this provision can be subject to astronomical fines. The fines would be equivalent to the number of TikTok users who continued to use TikTok after the divestment deadline — currently January 19 — times 5,000: a number that could quickly reach tens or hundreds of billions.

TikTok’s biggest hosting contract is a $1 billion deal with Oracle to host US TikTok users’ private information and keep it safe from intrusion by Chinese authorities. Ken Glueck, an executive vice president at Oracle, said Forbes the company plans to stop hosting that information on January 19 unless the legislature or a court intervenes to prevent the law from taking effect.

“The statute says we can’t provide cloud services after the 19th,” Glueck noted. “Whatever the law is, we abide by it. It is what it is, we all move forward.”

Glueck mentioned that the legislature could change the law, that President Biden could offer TikTok an extension, or that the courts could issue a stay to prevent the law from taking effect while TikTok appeals. “But we’re just a seller, we want to comply with the statute,” he reiterated.

Oracle is not the only vendor likely to confront this conundrum. At Microsoft, a contract is worth it more than 20 million dollars per month may be affected by the law. The agreement allows ByteDance to access OpenAI’s large language models through a Microsoft Azure license and powers several other ByteDance apps, including Cici, ChitChop, Coze, BagelBell and AI homework app Gauth.

ByteDance also uses Amazon’s AWS web hosting service — and TikTok’s ties to the retail mammoth — have recently put it in jeopardy: Amazon was questioned by congressional officials last month about a partnership between the companies. Google has also provided cloud services to TikTok in the past – in 2019, TikTok obliged to use more than $800 million on the company’s cloud offerings.

Microsoft, Amazon and Google have yet to respond to requests for comment.