Last week, Tencent released its fourth quarter and annual performance report for 2024, showing that its capital expenditure exceeded 76.7 billion yuan last year, a year-on-year increase of 221%, a record high, accounting for about 12% of the annual revenue of 660.3 billion yuan, as the AI strategy entered a reinvestment period.

There is no doubt that AI strategy has become the focus of attention in the capital market.

Tencent President Martin Lau revealed that Tencent's capital expenditure increased significantly in the fourth quarter of last year, because Tencent purchased more GPUs in the quarter to meet inference needs. "We plan to further increase capex in 2025 and expect capex to be in the low double-digit percentage of revenue."

In other words, Tencent's capital expenditure this year is likely to reach the level of 100 billion.

Tencent is reshaping its AI strategy

First of all, Ma mentioned that they reorganized the AI team a few months ago in order to launch new products and delve deeper into models faster. Not only that, Tencent has also increased its investment in AI, especially the research and development and promotion of its own original AI products.

Why does Tencent dare to "burn money" so much?

These investments are expected to bring good returns to Tencent, such as by improving the efficiency of its advertising business and extending the life cycle of its games. Moreover, as personal AI applications become more popular, and more enterprises begin to adopt Tencent's AI services, this will create greater value for the company in the long run.

On the same day that the earnings report was released, at the Tencent Global Digital Ecosystem Conference Shanghai Summit 2025, Tencent detailed its AI strategy. To put it simply, Tencent plans to adopt a multi-model strategy of "firmly investing in independent R&D + actively embracing open source", comprehensively layout the basic layer, model layer and application layer, and provide a wealth of AI products to help all walks of life grow and innovate.

This means that in addition to accessing advanced large models such as DeepSeek, Tencent will continue to strengthen its R&D investment in its own large models.

At present, Tencent is playing a big game of AI chess. Although short-term investment has increased, these layouts are likely to translate into tangible performance growth in the future. Investors can focus on the synergies between their AI business and existing products, after all, in the AI era, ecological companies like Tencent have obvious advantages.

In terms of AI strategy, we began to actively switch from defense to offense

Tencent has recently made a big move in the field of AI - the "Blitzkrieg" plan. It's fair to say that Tencent is the fastest in this race, especially when it comes to embracing the DeepSeek model.

Since February, Tencent has fully launched this program and has become the leader of the most active access to DeepSeek among major manufacturers. Not only did it simply add DeepSeek to several products, Tencent also boldly introduced DeepSeek into its main C-end product, which was the first time among the leading manufacturers.

Now, many Tencent products, including WeChat, Yuanbao, QQ Browser, QQ Music, ima (Tencent Smart Workstation), Tencent Docs and Tencent Map, have been connected to DeepSeek, and can also support the self-developed hybrid model at the same time. It's like equipping these products with dual engines to make them run faster and more steadily on the AI track.

In the opening battle of AI applications, there are two tactics that are particularly compelling. The first is that WeChat search is connected to the DeepSeek large model. Considering that WeChat has more than 1.3 billion monthly active users, this move is undoubtedly a super highlight. The second is that Tencent concentrates resources and vigorously promotes the development of ingots, and it is said that 30 versions have been updated in just 35 days, which is really not covered.

Since the release and open-source of the DeepSeek-R1 model, many Internet products have been connected, and everyone wants to compete for more market share through this well-recognized model. However, regardless of the efforts of other products, it is not as shocking as the access to a super platform like WeChat, which has more than 1.3 billion users.

Jingtai believes that Tencent's AI layout is both bold and smart: use DeepSeek to quickly strengthen capabilities, use WeChat to expand large-scale effects, and use ingots to explore innovation. This combination of "take-it-or-leave-it-ism + independent innovation" is likely to allow Tencent to continue to maintain its leading position in the AI era.

Tencent has a budget of 100 billion yuan this year

Tencent's investment in AI has begun to show up in its earnings reports. This year, they plan to invest a budget of 100 billion yuan, and in this regard, it seems that their determination and intensity are not inferior to Ali's.

Where is the money spent?

Martin Lau revealed that part of it will continue to invest in self-developed models and accelerate the development of AI applications for various business groups. At the same time, Tencent will also spend some money on marketing, such as increasing user awareness and usage of new AI products (such as ingots).

Martin Lau also mentioned: "We believe that these investments will bring good economic returns, and at the same time, we are able and willing to provide shareholders with capital returns." ” The plan is to repurchase at least HK$80 billion in shares by 2025.

With the support of real money, from enterprise (B-side) to consumer (C-side), Tencent is fully rolling out the map of its AI applications. This strategy is expected to become Tencent's second growth curve. However, investors also reminded that although AI technology can improve the intelligence level of Tencent's existing products, especially the WeChat ecosystem has huge commercialization potential, the key to achieving new growth is to see technological breakthroughs and market applications.

Since the beginning of the year, Hong Kong technology stocks have performed eye-catchingly, among which Tencent's share price has continued to rise, breaking through the HK$500 mark, an increase of more than 29% since the beginning of the year. As of the close of trading on March 19, Tencent's share price was about HK$540 per share, with a total market capitalization of about HK$4.96 trillion.

Tencent is using "money capabilities" to accelerate the deployment of AI. Although there is still a long way to go from the peak of the market value of 7 trillion yuan in 2021, AI is likely to become a key engine for Tencent to return to the top. With its two pillar businesses, social networking and gaming, it is firmly on the throne of China's "king of technology stocks", and will be an investment target to watch in the past, present and future.