Tencent to boost AI products for growth in China

Tencent, the Chinese tech giant, is expanding its focus on artificial intelligence (AI) to drive growth. The company recently reported strong financial results for the last quarter of 2024, showing an 11% increase in revenue, reaching 172.4 billion yuan, or about $24 billion. Profit for shareholders soared by 90% from the previous year. During discussions with media and analysts, Tencent executives, including Chairman Pony Ma, detailed their AI strategy. They are enhancing their gaming services with AI tools that help newcomers by coaching them and connecting players for better matches. The use of AI also improves targeted advertising by analyzing consumer behavior. As Tencent invests more in AI technologies, it plans to increase its capital expenditures to a low double-digit percentage of sales in 2025. This is a significant rise from last year when it was in the high single digits. The company is on a buying spree for semiconductors, which are essential for AI applications, and its capital spending jumped by 386% year-on-year in the last quarter. Tencent is facing tough competition from other tech companies like Alibaba and ByteDance, who are also developing AI products. Alibaba recently launched its Quark AI assistant and is investing heavily in AI infrastructure. One of Tencent's key AI products is Yuanbao, an AI assistant that can answer questions and browse the internet. It became significantly popular, registering 13 million monthly active users in February. Furthermore, Tencent is adding AI-based search capabilities to its WeChat app, which boasts nearly 1.4 billion users. Executives hinted at the possibility of developing a tailored AI agent for WeChat. This agent could connect to various mini-programs within the app, helping users with tasks like shopping or gaming without leaving the platform. Tencent is aiming to create an AI-powered super app and is well-positioned given its large user base across its services. In addition to WeChat, Tencent may also enhance AI features in its QQ messaging service which has over 500 million active users. Tencent's executives noted that more AI products are on the way, each evolving over time.