Tencent says it could make instant profits on $53B hardware splurge by renting it for AI workloads

Tencent, the Chinese tech giant, is betting on a new business model rather than instant profits from a $53 billion investment in AI hardware. During the company's Q2 earnings call, Bernstein analyst Robin Zhu inquired about the timeline for seeing a return on investment for the capital expenditure. Chief Strategy Officer James Mitchell stated that the strong demand for computing resources would allow Tencent to recover its depreciation costs "almost immediately" if it rented its infrastructure.

However, company president Martin Lau emphasized that Tencent is not focused on short-term gains but on building state-of-the-art models and deploying AI applications to achieve market leadership in China. The company's new AI offerings include WorkBuddy, an agent swarm that can plan, execute, and run tasks in parallel, and CodeBuddy, a code generation tool that accelerates cloud migration projects.

Tencent's latest model, the 295-billion open-weight Hunyuan-3, was released in July, and Lau promised that the upcoming Hunyuan-4 will be even more powerful. The company plans to produce additional versions of Hunyuan, with the goal of delivering a state-of-the-art model at some point. Despite the strategic shift, Tencent's revenue grew 11% to $30.3 billion, and net profit increased by 9% to $10.3 billion. However, the company's share price has trended down since the earnings announcement.