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Oracle Stock Rallies Monday on Approval of TikTok Deal

You may still be scratching your head and wondering what the kids these days are up to, but Oracle (NYSE:ORCL) is spending Monday making big moves in the market. The rally in Oracle stock comes on news that President Donald Trump had approved its deal to take a minority stake in TikTok.

The TikTok logo is displayed on a smartphone in front of the Oracle (ORCL) sign.

Source: Ascannio / Shutterstock.com

This weekend brought no shortage of chaos to Oracle stock. Just last week the company seemed ready to go, after it announced its intent to become the U.S. tech partner and a minority stakeholder in TikTok. Then things turned south, as Trump threatened to remove the short-form video app from all app stores over the weekend. The situation flipped once more, leaving Oracle victorious in pre-market trading on Monday.

Who, what, where, why? What exactly is going on — and why are investors rewarding Oracle stock? Trump has long had a bone to pick with TikTok, claiming the social media company, which is owned by Chinese ByteDance, poses national security risks to the U.S. Previous versions of those concerns focused on its collection of data from underage users. For many, the fight became one between Generation Z and a crotchety president.

But this fight had real consequences. TikTok is a hugely popular platform, and banning it in the U.S. would have an impact on influencers, marketers and millions of users. More importantly, the deal will certainly set a precedent for U.S.-China relations on tech. Remember, WeChat, a popular messaging platform from Tencent (OTCMKTS:TCEHY), is also under fire.

Things are looking good at the close of the weekend, and Trump may be able to frame himself as a superb dealmaker. He enforced his demands, and for now, TikTok will stay on our smartphones.

Why Is Oracle Stock Tik-Toking Higher?

In the recently announced deal, the U.S. version of TikTok will seek to hit the market in an initial public offering. Oracle and Walmart (NYSE:WMT) will each become pre-IPO investors with minority stakes up to 20%. Oracle — which was an early winner in the deal thanks to its Trump-supporting CEO — will take over any TikTok data pertaining to American customers. Lastly, the deal could include some sort of education fund.

The first key reason that this matters is that it is a win for Trump. His favored company has secured the deal, not Microsoft (NASDAQ:MSFT) or Twitter (NYSE:TWTR). He can say that he enforced national security and came to a favorable resolution. Most importantly, investors should note how profitable it can be for companies to support Trump. Oracle CEO Larry Ellison really sealed the deal here.

Oracle stock is also rallying on what is now in store for its future. Analysts have been quick to highlight that Oracle now is backing TikTok and Zoom Video Communications (NASDAQ:ZM) — two of the most important companies for younger consumers. This reality highlights the potential for Oracle to succeed against the likes of Facebook (NASDAQ:FB).

Moving forward, there is still uncertainty surrounding the fine print, but investors should have some confidence supporting Oracle stock.

On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Sarah Smith is a Web Content Producer for InvestorPlace.com. 

Article printed from InvestorPlace Media, https://investorplace.com/2020/09/oracle-stock-orcl-stock-rallies-monday-on-approval-of-tiktok-deal/.

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