During an earnings call with investors on Wednesday, Tencent boasted of a "strong stockpile" of GPUs. Furthermore, when asked about how U.S. trade policy regarding advanced AI chips was impacting Tencent's product development and launch plans, company President Martin Lau seemed to shrug off investor concerns.
In response to a question about high-end GPUs from Kevin Fong of international investment bank UBS, Lau started by characterizing the GPU situation as dynamic. Lau backed up his point by sharing the 'good news' that "I think we have a pretty strong stockpile of chips that we acquired previously and that would be very useful for us in executing our AI strategy."
Right now, investors might be happy to hear that Tencent is leveraging these GPUs for the best immediate returns, in advertising, for example. However, an important point comes next, when Lau explains that Tencent is moving away from "the belief of the American tech companies, which they call the scaling law," and towards smaller clusters which can still get "very good results."
Thanks to this adaptation, Tencent's Lau asserts that "we should have enough high-end chips to continue our training of models for a few more generations going forward."
On the software side, things are also being optimized for Tencent's business. In his answer to Fong, Lau floated the idea of improving inference efficiency twofold, and "basically that means the amount of GPUs gets doubled in terms of capacity."
Tencent explores "other chips"
Another important point raised concerned Tencent's potential use of "other chips." Its engineers appear to be looking at other AI accelerators, be they ASICs or GPUs, that can be sourced from within China, or can still be imported.
Lau concluded by highlighting that Tencent had "a lot of ways to which we can fulfill the expanding and growing inference needs," and not just keep buying (Western tech) GPUs.
Tencent's GPU spending up nearly 300%
Though Tencent is obviously being smart with its GPU purchases, it has still splurged a huge amount on them. In the financials released yesterday, it was notable that "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 expenditure has had a sizable impact on free cash flow.
U.S. plans backfired?
GPUs are well known as the current lifeblood of the AI industry. But for years now, the U.S. and its allies have sought to restrict the supply of the most advanced GPUs to hostile nations like China. The big fear is that these advanced technologies could multiply the effectiveness of advanced enemy weaponry, which could be turned against its creators in places like the U.S. and Taiwan.
The imposition of trade sanctions and export rules may have backfired, though. For a long time, the sanctions seem to have only loosely been enforced and have been easy to work around. Now, several years into the process, China appears to have established software and hardware that sidelines the requirement for AI tech from the Western allies. Now, here we are, with the Tencent boss seemingly unconcerned about U.S. trade restrictions, and a thriving domestic AI industry to help realize future plans.
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