Tencent has unveiled its latest innovation in artificial intelligence with the release of the T1 reasoning model, based on the Turbo S platform. This development marks a significant advancement in AI technology, accessible through the company's Yuanbao app. Additionally, Yuanbao offers users access to DeepSeek, further enhancing its functionality. Impressively, Tencent's AI assistant Yuanbao is experiencing a surge in downloads, outpacing competitors such as Bytedance's Doubao and the DeepSeek app.
In a strategic move, Tencent launched the Turbo S version of its Hunyuan AI model, which claims superior performance compared to DeepSeek V3, OpenAI's GPT-4o, Claude 3.5 Sonnet, and Llama 3.1 on crucial metrics like MMLU, Math, and Chinese language processing. Analysts from Nomura suggest that an investment upcycle has commenced in China's AI infrastructure, which could benefit suppliers exposed to major Internet and Telecom companies' capital expenditures on cloud and AI infrastructures.
"We believe that the AI infrastructure investment upcycle has started in China's AI value chain, which should benefit from leading suppliers exposed to China's major Internet/Telecom companies' capex on cloud and AI infrastructure," stated Nomura analysts.
Nomura analysts have identified three mainland China-listed printed circuit board companies poised to benefit from this trend: Shennan Circuits, Shengyi Technology, and WUS PCB. These companies have established partnerships with leading Chinese AI tech firms and are well-positioned to capitalize on the growing demand for AI infrastructure.
Tencent's advancements in AI also present new monetization opportunities. The growth trajectory of Yuanbao serves as a proven pathway for monetizing AI advancements. Social advertising is another established avenue for revenue generation, with potential implications for Tencent's search ads business.
"Social advertising is a tried and tested monetisation pathway for AI advancements, and Yuanbao growth potentially sets up a larger search ads business over time," noted experts familiar with the development.
Despite these technological strides, challenges remain. The CSI 300 index fell by approximately 1.4% over the week, highlighting broader market volatility. Conversely, Hong Kong's Hang Seng Index recorded a 5.6% increase last week, reaching a three-year high.
Industry experts acknowledge Tencent's ability to swiftly integrate DeepSeek within its ecosystem of apps, including WeChat and the Yuanbao assistant. This initiative underscores the company's commitment to rallying its resources toward common goals.
"We'd argue the last few weeks have presented ample evidence in favor of Tencent's ability to productionize AI," commented analysts observing Tencent's strategic maneuvers.
"Tencent's recent moves on implementing DeepSeek within its family of apps make it clear that this was one of the times Tencent's top management decided the troops must be rallied for a common goal," they added.
Tencent's innovations in AI signify more than just technological progress; they reflect a broader narrative of China's burgeoning interest in artificial intelligence as a critical sector for economic growth. The messaging surrounding these advancements sends a strong signal supporting both innovation and the private sector.
"The messaging on technology is 'encouraging', a strong signal to support both innovation and the private sector," remarked an industry insider.
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