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Tencent rushed to build up “one of the largest inventories of AI chips in China” before US export restrictions took hold, an executive said Wednesday.
Martin Lau, president of the Chinese tech giant, told analysts on an earnings call that it had purchased components from Nvidia (NVDA) early, allowing it to keep developing its generative AI model for at least “a couple of generations.”
“One of the key things that we have done was actually we were the first to put in orders for [the] H800, and that allows us to have a pretty good inventory,” Lau said.
He added that Tencent was now scouting new suppliers within China “for these training chips.”
Lau did not specify when the purchase took place, but the H800 is among the products restricted from sale to China due to US export curbs announced last month, Nvidia said in October regulatory filings. It is one of the chipmaker’s advanced AI chips designed for use in data centers, the physical facilities used to store troves of electronic information.
In late October, Nvidia disclosed that the just-announced restrictions had come into effect “immediately,” weeks earlier than scheduled.
Over the past year, the United States and China have progressively escalated a feud over access to the most advanced semiconductors, as well as the materials and equipment needed to create the technology.
Washington’s decision to reduce the types of semiconductors that American companies can sell to China last month further tightened a set of export controls first introduced in October 2022 on national security grounds.
The Biden administration deems the latest measures necessary to prevent potential use of the hardware for China’s military advancement and to close loopholes in existing regulations. In response, Beijing has accused Washington of “weaponizing trade and tech issues.”
The standoff has led other Chinese firms to build up their chip supplies.
This month, one of China’s most prominent tech investors, Kai-Fu Lee, told Bloomberg that his new Beijing-based startup, 01.AI, had also stockpiled chips it needed for the near future.
The company began assembling its reserve of chips earlier this year, even using borrowed funds from Lee’s venture firm Sinovation Ventures, because “we felt we had to,” he told the media outlet in an interview. The venture capital firm did not respond a request for comment on the matter.
The practice of stockpiling is not new. In recent years, before it was slapped with crippling US trade restrictions in 2020, Chinese tech giant Huawei also “stockpiled a two-year supply of chips prior to US entity restrictions taking effect,” according to a report from the Center for Strategic and International Studies.
China’s top chipmaker, Semiconductor Manufacturing International Corporation (SMIC), has also “amassed a large number of machines and potentially also a large stockpile of spare parts that it can draw from,” the report said.
While the US export ban currently does not “affect the development of Hunyuan and our AI capability in the near future,” Tencent is concerned it could affect its ability to resell components to other customers, according to Lau, referring to its AI bot.
“Going forward, we will have to figure out ways to make … the usage of our AI chips more efficient,” namely by working to retain most of the company’s high-performance chips for training the model, he added.
Hunyuan, which Tencent says is meant to denote “something that is all encompassing and without limit,” was launched by the Shenzhen-based company in September.
The bot was developed specifically for corporate users, allowing them to catch up on meetings by viewing automated summaries or put together documents more efficiently, Lau told analysts.
The platform is currently available on a limited basis to customers and the public, according to Tencent.
The company has reported solid earnings for the quarter ended September, logging a 10% jump in revenue that met analyst expectations. Sales surged to 154.6 billion yuan ($21.3 billion) compared to the same period a year ago, while profit attributable to shareholders climbed 39% to 44.9 billion yuan ($6.2 billion).
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