Tencent Stockpiles Nvidia Chips, Explores Chinese Alternatives
Tencent swiftly amassed a substantial cache of Nvidia chips, establishing a dominant supply of AI processors in China, in response to impending US export limitations, as confirmed by a company executive
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On Wednesday, an executive revealed that Tencent feverishly amassed a formidable collection of AI chips in China ahead of the implementation of US export restrictions.
On an earnings call, Martin Lau, president of the Chinese tech giant, mentioned that they had procured components from Nvidia (NVDA) in the early stages. This strategic move enabled them to continue advancing their generative AI model for a significant period of time, spanning at least "a couple of generations." Lau further added that their proactive approach included being the initiators in placing orders for the H800, resulting in a substantial inventory advantage.
Tencent is currently searching for new suppliers in China for "training chips," according to Lau. The timing of the purchase was not mentioned, but Nvidia stated in October regulatory filings that the H800, along with other products, is subject to US export restrictions. The H800 is an advanced AI chip developed by Nvidia specifically for data center applications, which are used to store large amounts of electronic data.
In late October, Nvidia disclosed that the just-announced restrictions had come into effect "immediately," weeks earlier than scheduled.
A Nvidia HGX H100 server is positioned at the company's headquarters in Santa Clara, California, US, on Monday, June 5, 2023. Nvidia Corp. now dominates the global technology market, holding an 80% share in data-center accelerator chips. The current wait time for their AI processors is eight months.
The tech battle between the US and China has intensified, with the US now severing China's access to AI chips, advanced semiconductors, and the necessary materials and equipment for technology development.
Washington's recent decision to limit the variety of semiconductors that American companies are allowed to export to China has intensified existing export controls that were initially implemented in October 2022 due to national security concerns. The Biden administration considers these new measures essential in preventing the possible utilization of such hardware for China's military progress and also to address any loopholes in current regulations. Conversely, Beijing has accused Washington of "weaponizing trade and technology matters."
Other Chinese companies have increased their chip reserves due to the standoff.
Tech investor Kai-Fu Lee, one of China's prominent figures, disclosed that his new startup, 01.AI, based in Beijing, has also amassed a sufficient stock of chips required for the upcoming period, according to Bloomberg.
The company initiated the accumulation of its chip reserves earlier this year, even resorting to borrowing funds from Sinovation Ventures, Lee's venture firm. According to an interview with the media outlet, Lee stated, "we felt it was necessary." Despite being requested for comment on the matter, the venture capital firm did not respond.
A displayed section of an integrated circuit board at the Semicon Taiwan exhibition in Taipei, Taiwan, on Tuesday, Sept. 6, 2023. The exhibition will continue until Sept. 8. Photograph by I-Hwa Cheng from Bloomberg/Getty Images.
The global chip industry will experience a slowdown due to the tensions between the United States and China, as stated by the founder of TSMC. Chinese tech giant Huawei had also engaged in stockpiling chips, amassing a two-year supply, before facing trade restrictions imposed by the US in 2020, according to a report from the Center for Strategic and International Studies.
China's leading chip manufacturer, Semiconductor Manufacturing International Corporation (SMIC), has reportedly accumulated a substantial inventory of machines and possibly a significant reserve of spare parts, as stated in the report.
Although the current US export ban does not presently hinder the progress of Hunyuan's development and our AI capabilities, Tencent is apprehensive about the potential impact on its ability to resell components to other clients, Lau mentioned, specifically referring to its AI bot.
"Moving ahead, we must find innovative approaches to optimize the utilization of our AI chips," emphasized the speaker, stating that the company's focus would be on maximizing the allocation of high-performance chips for model training.
CEO Sam Altman addressing the audience at the inaugural Open AI DevDay conference in San Francisco, California on November 6, 2023. (Photo by Justin Sullivan/Getty Images)
This was a massive week for AI
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.
Lau informed analysts that the bot was designed specifically for corporate users, enabling them to conveniently review automated meeting summaries and improve document assembly efficiency.
Tencent confirmed that the platform is currently offered in a restricted capacity to both customers and the general public.
The company recorded strong earnings for the quarter ending in September, with revenue increasing by 10% to meet analyst predictions. Sales reached 154.6 billion yuan ($21.3 billion), a significant surge from the previous year, while profit attributable to shareholders showed a substantial growth of 39% to 44.9 billion yuan ($6.2 billion).
