Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
Tencent’s messaging apps work at a scale that matches several global platforms. With a 93% share between 1.4 billion users and Chinese internet users, it was part of everyday life among locals. However, scale is not the only guarantee of continuous domination. With artificial intelligence rapidly reshaping China’s industry, Tencent is currently making a calculated bet on the next major transformation.
Tencent stock has been driven by the announcement that social media and messaging apps (the domestic version of Wechat apps that serve international users) will integrate AI-driven searches from Chinese responses, with the past week increased by 15%. Openai. This is more than just a feature upgrade. It shows a significant change in Tencent’s AI strategy. It’s about choosing an external partner over your own large language model.
Tencent has a good reason to all-invest against AI. This technology was already driving growth. Tencent’s profits rose 47% in the third quarter, beating expectations. Ad revenue rose from nearly 500 million to $4.1 billion, primarily due to AI-powered video ads and recommended algorithms. This self-reinforcement cycle, where AI drives engagement, engagement generates more data and refines AI models, is quickly becoming a key advantage.
However, Tencent’s ambitions go beyond search and advertising. In China’s crowdsector, it is behind local rivals Alibaba, which has 36% of the market, and about a fifth of Huawei Cloud. China’s cloud market is growing rapidly, with infrastructure services spending in mainland China exceeding $10 billion and rising more than 10 minutes in the third quarter. Here, Deepseek’s AI capabilities serve as a key differentiator for Tencent’s cloud business, boosting enterprise services as they build AI development tools and market share.
Recent rallies in Tencent stocks have earned up to 80% in the last 12 months. The stock trades at 19x advance revenue, a premium for local tech rivals including Alibaba, reflecting the expectations that AI-powered search and cloud integration will drive new growth .
By integrating DeepSeek into its products instead of relying on its own AI, Tencent is making a trade-off. Full flexibility for internal control. This compromise may be necessary because speed and scalability are just as important as innovation in China’s rapidly changing, highly competitive AI landscape.
june.yoon@ft.com
