Key Takeaways:
Tencent Holdings will continue procuring Nvidia's H200 AI chips while deepening ties with domestic chipmakers, pursuing a dual-track strategy as Beijing steers firms toward local suppliers.
Tencent Holdings (0700.HK) will keep buying Nvidia Corp.'s H200 AI chips and expand partnerships with domestic semiconductor makers, Senior Executive Vice President Dowson Tong said, as the Chinese tech giant navigates a widening rift between Washington's export approvals and Beijing's push for self-reliance.
"The company has maintained long-term partnerships with international chipmakers including Nvidia and Advanced Micro Devices Inc., with opportunities to use their chips in both domestic and overseas businesses," Tong, who also serves as CEO of Tencent Cloud and Smart Industries Group, said. He added that Tencent has strengthened cooperation with domestic chipmakers in recent years to achieve a diversified supply chain.
The U.S. Commerce Department recently cleared roughly 10 Chinese firms — including Tencent, Alibaba Group Holding Ltd., ByteDance Ltd. and JD.com Inc. — to purchase up to 75,000 H200 chips each through approved distributors, according to Reuters. At current pricing, the ceiling caps initial sales at roughly $15 billion to $20 billion in revenue, KeyBanc analyst John Vinh estimated, modeling total Chinese demand at about 1.5 million units annually, or $30 billion in potential revenue.
The approval came as Nvidia's official market share in China has fallen to effectively zero, down from roughly 95 percent before U.S. export curbs took hold, Chief Executive Officer Jensen Huang acknowledged. In its most recent 10-K filing, Nvidia said it is "effectively foreclosed from competing in China's data center computing market" and assumes no data center compute revenue from the region in current guidance.
Beijing's Push for Domestic Alternatives
Despite the U.S. approval, not a single H200 chip has shipped to a Chinese buyer, and Beijing has quietly steered domestic firms away from following through on orders placed earlier this year. Commerce Secretary Howard Lutnick told a Senate hearing last month that Chinese firms are "trying to keep their investment focused on their own domestic" suppliers, including Huawei Technologies Co.
DeepSeek, one of China's leading AI labs, launched its V4 model on April 24 optimized for Huawei's Ascend chips rather than Nvidia hardware. ByteDance has lifted its 2026 AI capital expenditure to roughly $30 billion, with a larger share now flowing to domestic chipmakers. Huawei's flagship Ascend 950PR has seen prices rise roughly 20 percent on demand strength after the DeepSeek launch.
Huang said in January that Chinese demand for the H200 was "very high," with orders exceeding 2 million units before Beijing's pause. He has since conceded the market to Huawei. "I don't have any expectation, which is the reason why we put all of our guidance, all of our numbers, all the expectations that I've set with all of our analysts and investors to invest nothing, to expect nothing," Huang said.
Tencent's AI Infrastructure Buildout
Tong said the government supports Tencent's expansion of computing power infrastructure. The company's AI assistant Yuanbao has so far no plan to commercialize for consumers but will continue expanding into more lifestyle services and WeChat Mini Programs. Tencent Cloud also announced new products targeting the global market, including Tencent WorkBuddy, an enterprise AI assistant; Tencent Design Miora, a design tool; and TokenHub, a token management platform.
Nvidia delivered another blockbuster quarter, with revenue soaring 85 percent year over year to $81.52 billion in fiscal first quarter 2027. But the stock slipped after the report as investors weighed the China headwind against the broader AI boom. Tencent shares fell 2.3 percent on Thursday, with short selling at $240.8 million, or 2.3 percent of turnover.
This article is for informational purposes only and does not constitute investment advice.
