China's Tencent sees profits surge as AI drive accelerates

Core Viewpoint - Tencent's profit surged by 90% in Q4 2024, driven by its accelerated investment in artificial intelligence [1][3][4]. Financial Performance - Tencent's net profits for the three months ending December 31 reached 51.3 billion yuan ($7.1 billion), marking a 90% year-on-year increase [3]. - The company's revenue for the same period was 172.4 billion yuan, an 11% year-on-year rise, surpassing Bloomberg's forecast [3]. - For the entire year, Tencent reported total revenue of 660.3 billion yuan, an 8% increase from 2023, and net profits of 194.1 billion yuan, up 68% [4]. AI Strategy - Tencent's CEO, Pony Ma, attributed the double-digit revenue growth to enhancements in the advertising platform through AI, increased engagement on video accounts, and growth in the gaming sector [4]. - The company has reorganized its AI teams to focus on rapid product innovation and deep model research, alongside increasing AI-related expenditures [4]. - Tencent is trialing its AI reasoning model, "Hunyuan Thinker," aimed at providing a more professional and human-like writing style [8]. Market Context - The strong financial results followed a significant rise in Tencent's stock price, reaching its highest level in nearly four years [5]. - The surge in investor confidence in Chinese technology stocks, particularly in AI, was influenced by the emergence of local startup DeepSeek [2][7]. - Tencent has expressed respect for DeepSeek and is integrating its technology across multiple services [7][8]. Challenges - Despite the positive results, Tencent faces challenges such as a sluggish domestic economy and political pressure from the U.S., which has placed the company on a list of firms allegedly linked to Beijing's military [9].