(Bloomberg) — Tencent Holdings Ltd. outlined plans to sharply increase spending on AI infrastructure after posting its quickest tempo of income development since 2023, displaying that China’s most respected firm is intent on conserving tempo with rivals within the post-DeepSeek period.
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Income rose a better-than-projected 11% to 172.5 billion yuan ($23.8 billion) for the three months ended December, whereas internet revenue nearly doubled. The corporate additionally unveiled plans to purchase again a minimum of HK$80 billion price of shares and proposed a 32% hike in its annual dividend for 2025. Shares in Prosus NV, a significant shareholder, climbed greater than 2% in Europe.
Tencent sketched out a extra measured method to synthetic intelligence than arch-foe Alibaba Group Holding Ltd., which final month declared it was going all-in on AI improvement. Billionaire founder Pony Ma described how Tencent made the “cautious consideration” to depend on each in-house and open-sourced fashions — in a lot the identical manner it publishes each its personal and third-party video games.
Tencent intends to commercialize AI by beefing up companies akin to promoting and WeChat, whereas spending on analysis to maintain tempo with Alibaba and DeepSeek, whose emergence in January galvanized international AI improvement. Tencent plans to commit a low-teens proportion of its 2025 income towards capital expenditures, together with on AI infrastructure — greater than $10 billion, primarily based on analysts’ projected gross sales this 12 months.
“AI is definitely in a really early stage, so it’s actually exhausting to speak about what the eventual state would appear to be,” President Martin Lau informed analysts on a post-results briefing. However every of Tencent’s consumer-facing functions “will proceed to evolve into a really helpful and much more highly effective product to customers.”
Tencent ramped up its purchases of AI chips in 2024’s closing quarter to serve elevated demand, which ought to translate into quicker cloud income development, executives stated. The corporate is working round US restrictions on essentially the most highly effective Nvidia Corp. semiconductors. Chief Technique Officer James Mitchell stated DeepSeek nevertheless has demonstrated the way it’s doable to attain breakthroughs for much less, and Tencent itself was prioritizing “high-value” use circumstances.
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Tencent is among the many main Chinese language tech names to report this week, wrapping up a carefully watched earnings season for a trillion-dollar sector that’s rounding a nook.
President Xi Jinping final month met with distinguished entrepreneurs together with Tencent chief Ma and Alibaba co-founder Jack Ma, signaling Beijing’s softening stance towards a non-public sector it assailed over three years. Additionally in attendance had been a brand new era of founders representing industries like chipmaking, electrical automobiles and AI, echoing Xi’s priorities throughout a tech face-off towards the US.
That symposium got here simply weeks after Hangzhou-based DeepSeek launched a mannequin that rivals OpenAI’s whereas needing a lot much less computing assets.
The Chinese language startup’s R1 has triggered soul-searching amongst Chinese language tech giants, who’re now ramping up the discharge of comparable mannequin upgrades or elevating investments in AI infrastructure. Alibaba made one of the crucial dramatic strikes by pledging to spend greater than $50 billion on its AI and cloud computing networks over the subsequent three years. The e-commerce pioneer’s CEO declared that synthetic normal intelligence — human-like AI functionality — is now its “major goal.”
Tencent gained roughly 30% or $140 billion in market valuation thus far this 12 months, helped by a broader Chinese language tech rally induced by the rise of DeepSeek. However that lags behind a 70%-plus leap in shares of arch-rival Alibaba, whose Qwen mannequin underpins one of many nation’s extra common AI companies.
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Tencent’s unchanged concentrate on leveraging synthetic intelligence internally, particularly in advertisements and video video games, stands the next likelihood of producing a right away payback than its friends. Tencent’s 4Q outlook assertion lacked the Large Bang method to AI seen from Alibaba, which is extra centered on cloud computing and fewer sure long-term alternatives in synthetic normal intelligence (AGI). Tencent confirmed it had reorganized its AI groups to sharpen its focus.
– Robert Lea and Jasmine Lyu, analyst
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Tencent is taking part in catch-up. It built-in DeepSeek’s open-sourced fashions into companies together with WeChat search and its chatbot Yuanbao, which briefly turned the nation’s most downloaded free app on iPhone. With Peacekeeper Elite, one in all Tencent’s two largest gaming titles, DeepSeek kinds the muse of a brand new digital assistant that teaches gamers shoot. On Tuesday, it launched AI companies that flip textual content or pictures into 3D visuals and graphics, probably streamlining the usually prolonged and dear studio improvement course of.
“Tencent has traditionally caught up at a later stage, narrowing the market share hole and even surpassing the primary mover, backed by its distinctive WeChat ecosystem,” Goldman Sachs analysts together with Ronald Keung wrote in a notice earlier than the outcomes. Tremendous-apps like WeChat and ByteDance Ltd.’s Douyin are finest positioned to faucet into AI software or agent alternatives, they stated.
With a billion-plus customers, WeChat stays Tencent’s most reliable asset because it takes on a much bigger monetization position in areas from promoting to mini-games and on-line commerce. It additionally displays the financial atmosphere by way of companies like ride-hailing and meal supply — although the fintech division that comes with that funds community is now Tencent’s most stagnant unit.
Tencent scored final 12 months with sport releases from Nexon Co.’s Dungeon & Fighter Cellular to its personal PC shooter Delta Pressure — titles it intends to develop into so-called evergreen franchises that may generate regular money.
However there’s no assure it may repeat that feat in 2025. Tencent joined international friends in slashing improvement jobs whereas realigning its concentrate on fewer key titles. Its pipeline stays robust with a handful of possible hits together with Honor of Kings: World, Monster Hunter Outlanders, and the China launch of Goddess of Victory: Nikke.
–With help from Vlad Savov, Claire Che, Luz Ding, Debby Wu and Charlotte Yang.
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