Tencent, China's leading tech company, has announced its intention to shift its future focus towards artificial intelligence (AI), following a significant decline in revenue in its gaming division. The company, which is valued as China's most valuable, has been grappling with challenges in its gaming sector, which traditionally contributes almost a third of the company's profits. Tencent Games, the division responsible for popular global games like "PlayerUnknown's Battlegrounds" and "Honor of Kings," experienced a notable drop in revenue. The gaming industry in China, as a whole, witnessed a decline in deal value from $16.9 billion in 2018 to $158 million in 2023.
During an annual corporate event in China on January 29, Tencent's CEO, Ma Huateng, referred to gaming as the company's "flagship business" but acknowledged the significant challenges it faced in the past year. Ma highlighted the fierce competition in the gaming sector, stating, "We found ourselves overwhelmed because our competitors kept churning out new products that left us feeling like we had nothing to gain." In response to the downturn in gaming profits, Ma signaled Tencent's strategic shift towards a greater focus on artificial intelligence technology.
While admitting that Tencent is not currently considered an industry leader in AI, Ma expressed confidence that the company is not far behind its competitors. He stated, "We can finally follow the lead of the top companies." Tencent's foray into AI is likely to hinge on Hunyuan, a large-scale language model positioned as a local competitor to OpenAI's ChatGPT. Hunyuan was launched for enterprise use by Tencent in September 2023 and swiftly gained popularity in China, joining the ranks of other widely-used models such as Alibaba’s Uni-President Qianwen and Baidu’s Ernie Bot.
The shift towards AI aligns with China's broader goal, set before the emergence of ChatGPT, of becoming a global leader in artificial intelligence by 2030. However, the current dominance of OpenAI in the global market and Nvidia's leadership in AI hardware pose challenges to China's ambitions in the AI sector. Tencent's strategic move reflects the evolving landscape of technology in China, where companies are adapting their focus to emerging trends and competitive dynamics.
