Tencent Confident in AI Development Despite U.S. Trade Restrictions, Boasts Strong GPU Stockpile and Explores Alternatives

During an earnings call with investors on Wednesday, Tencent's President, Martin Lau, revealed that the company has a "strong stockpile" of GPUs. This disclosure came as part of a broader discussion about the impact of U.S. trade policies on advanced AI chip supplies and Tencent's strategic adjustments. When questioned by Kevin Fong of UBS about high-end GPUs, Lau described the situation as dynamic but reassuring. He stated, "We have a pretty strong stockpile of chips that we acquired previously, which will be very useful for us in executing our AI strategy." This stockpile is currently being utilized for immediate applications, such as optimizing advertising, which is likely to please investors. However, Lau also highlighted that Tencent is diverging from the "scaling law" commonly followed by American tech companies. Instead, the company is focusing on smaller clusters that still yield effective results. According to Lau, this approach ensures that "we should have enough high-end chips to continue our training of models for a few more generations." On the software front, Tencent is working to enhance inference efficiency, aiming to double their performance. This improvement effectively increases the GPU capacity, making the existing stockpile even more valuable for the company's operations. Tencent is also exploring alternative AI accelerators, including ASICs and GPUs sourced from within China or through imports. Lau emphasized that the company has multiple options to meet its growing inference needs beyond relying solely on Western GPU suppliers. He said, "We have a lot of ways to fulfill the expanding and growing inference needs, and not just keep buying (Western tech) GPUs." Despite this strategic diversification, Tencent has significantly increased its GPU-related expenditures. According to the financial report released yesterday, "Operating CapEx was RMB26.4 billion ($3.6 billion), up almost 300% year-on-year, driven by increased investments in GPUs and servers to ramp up our AI capabilities." This substantial investment has notably impacted the company's free cash flow. The U.S. and its allies have long attempted to restrict the supply of advanced GPUs to countries like China, fearing that such technology could enhance the capabilities of potential adversaries. These sanctions and export controls were intended to limit the development of sophisticated weapons systems. However, it seems these measures may have backfired. For years, the sanctions were loosely enforced, allowing Chinese firms to find ways around them. As a result, China has developed robust domestic software and hardware ecosystems that reduce the reliance on Western AI technology. Today, Tencent's leadership appears unfazed by U.S. trade restrictions, thanks to a thriving domestic AI industry. This shift underscores the resilience and adaptability of Chinese tech firms in the face of geopolitical constraints. For the latest news, analysis, and reviews, follow Tom's Hardware on Google News and make sure to click the Follow button.