Tencent Outlines Expansion Strategy for AI-Centric Products to Gain Market Edge over Competitors
Chinese technology giant Tencent plans to enhance its business growth by integrating more artificial intelligence (AI) features and products, following strong financial results for the last quarter of 2024. Analysts predict that Tencent may transform its widely-used WeChat messaging app into a AI-powered "super app" with various new functionalities.
On Wednesday, Tencent's senior executives, including Chairman Pony Ma and President Martin Lau, disclosed their AI strategy. They explained that AI is currently boosting their primary gaming business by coaching novice players and optimizing online matches, while improving customer understanding for better targeted advertising.
The results reflect these advancements: Tencent's revenue grew by 11% compared to the same period last year, surpassing 172.4 billion yuan ($24 billion) in the last quarter of 2024. Profits also escalated by 90% to 51.3 billion yuan in comparison to the fourth quarter of 2023.
Tencent's Hong Kong-listed stock has escalated nearly 30% this year due to heightened interest in AI-focused ventures within the Chinese tech sector. This enthusiasm increased after the launch of DeepSeek's low-cost AI model in January, which surpassed expectations even in Silicon Valley. Tencent announced that it intends to heighten its investment in AI, with capital spending estimated to be a "low teens percentage" of its sales in 2025.
Previously, Tencent invested a "high single digit percentage" of its revenue on such investments, according to Shanghai-based analyst Charlie Chai. The company now requires more powerful chips called GPUs that process AI data.
In the last quarter, Tencent's capital spending skyrocketed 386% year-on-year to 36.6 billion yuan, as it purchased more semiconductors. Executives suggest they might require even more computing power this year.
Tencent faces fierce competition at home from other significant Chinese tech companies like Alibaba and ByteDance, which offer AI chatbots and assistant apps to appeal to users. Last week, Alibaba introduced its Quark AI assistant, and in February, it pledged to invest at least 380 billion yuan over the next three years in cloud computing and AI technology.
Tencent promotes its Yuanbao AI assistant app given its integration of Tencent's Hunyuan model and DeepSeek's R1 model. This chatbot can answer questions, search the web, summarize information, and even take voice calls. In February, it ranked fifth among China's popular AI products with 13 million monthly users, according to aicpb.com.
However, Yuanbao is just one aspect of Tencent's broader strategy to attract more users. In February, the company incorporated AI search features into WeChat, boasting nearly 1.4 billion users. During a call with analysts, President Martin Lau suggested that Tencent might develop a dedicated AI assistant solely for WeChat.
This proposed AI assistant could connect with various mini-programs housed within WeChat, facilitating shopping, reading, booking flights, and gaming without leaving the app. Lau added that Tencent could readily create an AI assistant capable of employing these mini-programs for more complex tasks but didn't specify when these new products might become available.
Tencent will continue reliance on the Hunyuan model and other external models, as different AI models excel at different tasks, according to the company's leaders. They also hinted at adding more AI features to its QQ messaging app, with over 500 million monthly users.
Lau stated, "We'll see more and more AI products, and each product will continually improve over time."
In line with their strategic plans, Tencent's executives announced their intention to integrate artificial intelligence (AI) further into their business, especially in their gaming and advertising sectors, for enhanced growth. (First sentence)
To expand the capabilities of their flagship WeChat messaging app, Tencent is considering developing an AI-powered super app, incorporating various new functionalities and potentially an AI assistant, aiming to appeal to a broader user base. (Second sentence)
