Tencent's gaming and advertising profits give it an edge over Z.AI in China AI race
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Tencent's domestic video games and advertising units grew 17% and 22% year-on-year in the recent quarter, the strongest core performance among China's AI rivals. Visible Alpha forecasts Alibaba's China commerce revenue to fall 2.7% this week, while Epoch AI estimates frontier-model training costs are rising 3.5-fold annually.
Key Facts
- Tencent's domestic video games and advertising units grew 17% and 22% year-on-year respectively in the recent quarter.
- Visible Alpha forecasts Alibaba's China commerce revenue to fall 2.7% when it reports June-quarter earnings this week, with that segment still accounting for roughly 40% of total revenue.
- Epoch AI estimates frontier-model training costs are increasing 3.5-fold annually, implying the most advanced training runs will exceed $1 billion by 2027.
- Tencent spent nearly $8 billion in capital expenditures in the three months to June, mostly on computing power.
- Eddie Wu, boss of Qwen-owner Alibaba, warned in May that the company would overshoot its three-year capital expenditure guidance of 380 billion yuan ($56 billion).
AI Funding Pressures
Epoch AI estimates frontier-model training costs are increasing 3.5-fold annually, implying the most advanced training runs will exceed $1 billion by 2027. Eddie Wu, boss of Qwen-owner Alibaba, warned in May that the company would overshoot its three-year capital expenditure guidance of 380 billion yuan ($56 billion). Tencent spent nearly $8 billion in capital expenditures in the three months to June, mostly on computing power. AI labs will need to keep investing in chips and talent to stay in the race.
Tencent's Core Engine
Tencent's domestic video games and advertising units saw sales grow 17% and 22% year-on-year respectively in the recent quarter. Tencent's core businesses look most robust compared with Alibaba. Visible Alpha forecasts Alibaba's China commerce revenue to fall 2.7% when it reports June-quarter earnings this week. That commerce business still accounts for roughly 40% of Alibaba's total revenue.
Baidu Ernie Decline
Baidu's once-leading Ernie model has fallen behind, prompting CEO Robin Li on Tuesday to vow to return it to the frontier. Z.AI boasts some of the world's most competitive open-weight models but depends on China's capital markets for funding. The $62 billion loss-making Z.AI faces pressure as larger rivals Alibaba and Tencent lean on e-commerce, cloud, gaming and advertising profits.
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Tencent's gaming and advertising profits give it an edge over Z.AI in China AI race
