A roughly $7bn, five-year lease gives the Chinese internet giant access to about 100,000 advanced chips in south-east Asia, pushing its quarterly free cash flow negative for the first time in more than a decade.
Tencent, China's leading social media and gaming company, has signed the largest overseas computing lease in its history, renting capacity from US cloud provider Oracle as it works to close the gap with rivals in artificial intelligence. Two people familiar with the matter said the five-year agreement, reached this year, covers several Oracle data centres across south-east Asia.
The arrangement gives Tencent use of roughly 100,000 sophisticated AI chips that it cannot obtain inside China. It is using them to refine its models and build autonomous software agents. One of the sources put the deal's value at around $7bn, with about 30 per cent payable up front.
That large prepayment helped push Tencent's free cash flow to negative Rmb13.8bn ($2bn) in the second quarter, its first quarterly deficit in over ten years. Capital expenditure for the period climbed 176 per cent from a year earlier to Rmb53bn ($7.9bn), which the company attributed to AI infrastructure and advance payments for computing resources.
Scramble for offshore capacity
Chinese technology groups are increasingly looking abroad for computing power because of limited domestic supply and tighter US export controls. Leasing arrangements like Tencent's are permitted under American rules and can open the door to Nvidia's most advanced processors, which cannot be sold into China.
Overseas capacity matters most for training large models, a job that homegrown chips cannot yet handle. ByteDance and Alibaba remain the biggest customers of south-east Asian data centres, though Tencent is now catching up with multibillion-dollar commitments of its own.
Washington's efforts to stop restricted Nvidia chips reaching China through third locations have sharpened demand. The result has been higher prices, longer contract terms and bigger upfront payments for data centre leases.
Agents and models take centre stage
Tencent's infrastructure spending has surged over the past year as it tries to narrow the gap in AI capability. Its latest Hunyuan models have improved markedly and are closing in on leading domestic systems such as Alibaba's Qwen.
With stronger models in hand, the company is rolling out Xiaowei, an agent built into WeChat, its superapp with more than 1.4bn users. Responding to plain-language commands, Xiaowei can carry out tasks across the app's millions of mini-programmes, such as ordering food or booking services.
Tencent has also assembled a broader set of AI agents for productivity and business use. Its flagship, WorkBuddy, is an AI-native office assistant that has gained users rapidly and leads China's market for PC-based office agents. To support the push, the company has recruited more top-tier talent and reorganised its infrastructure and data departments.
