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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Tencent’s AI Bet: A Calculated Risk
Tencent’s messaging app operates at a scale few global platforms can match. With 1.4bn users and a 93% share among Chinese internet users, it has long been a part of daily life among locals. Yet scale alone is not a guarantee of continued dominance. With artificial intelligence quickly reshaping industries in China, Tencent is now making a calculated bet on its next big transformation.
A New Direction for AI
Tencent’s stock has risen 15% in the past week, driven by the announcement that its social media and messaging app Weixin will integrate AI-powered search from DeepSeek, China’s answer to OpenAI. This is more than just a feature upgrade. It marks a significant shift in Tencent’s AI strategy: choosing an external partner over its own proprietary large language model.
The Power of AI
Tencent has good reason for its all-in bet on AI. The technology was already driving its growth. Tencent profits rose 47% in the third quarter, beating expectations. Advertising revenue rose almost a fifth to $4.1bn, largely due to AI-powered video ads and recommendation algorithms. This self-reinforcing cycle, where AI drives engagement, engagement generates more data, and data refines AI models, is quickly becoming an important edge.
Beyond Search and Ads
Tencent’s ambitions go beyond search and ads. In China’s cloud sector, it lags behind local rival Alibaba, which has 36% of the market, and Huawei Cloud, which has about a fifth. The Chinese cloud market is growing fast, with infrastructure service spending in mainland China exceeding $10bn and growing more than a tenth in the third quarter, according to Canalys, as companies race to include AI in their operations. Here, DeepSeek’s AI capabilities could serve as a key differentiator for Tencent’s cloud business, boosting its AI development tools and enterprise services as it builds out its market share.
A Calculated Risk
By integrating DeepSeek into its products instead of relying on its proprietary AI, Tencent is making a trade-off: flexibility over full in-house control. In China’s fast-changing, fiercely competitive AI landscape, where speed and scalability matter as much as innovation, this compromise may be a necessary one.
Conclusion
Tencent’s AI bet is a calculated risk, but one that could pay off in the long run. As the company looks to expand its cloud business and stay ahead of the competition, its decision to partner with DeepSeek could be a strategic move. With the Chinese cloud market growing rapidly, Tencent’s AI capabilities could be a key differentiator, driving growth and profitability in the years to come.
FAQs
Q: What is Tencent’s stock performance like?
A: Tencent’s stock has risen 15% in the past week, driven by its announcement to integrate AI-powered search from DeepSeek into its Weixin app.
Q: What is DeepSeek?
A: DeepSeek is China’s answer to OpenAI, a large language model that can be used for a variety of AI-powered applications.
Q: Why is Tencent partnering with DeepSeek instead of using its own AI model?
A: Tencent is making a trade-off: flexibility over full in-house control. By partnering with DeepSeek, it can access the company’s AI capabilities more quickly and scale its applications faster.
Q: What is the Chinese cloud market like?
A: The Chinese cloud market is growing rapidly, with infrastructure service spending in mainland China exceeding $10bn and growing more than a tenth in the third quarter, according to Canalys.
