Tencent is ramping up its AI capabilities with a large-scale purchase of NVIDIA's H20 chips, reportedly worth billions of yuan (equivalent to hundreds of millions of US dollars), according to multiple sources. This move supports the rapid rollout of DeepSeek, an emerging AI model now integrated into WeChat and several other Tencent apps.

Rising Demand Sparks Supply Shortages

NVIDIA's H20 chip, launched in late 2023, was specifically designed for the Chinese market to comply with U.S. export restrictions. It remains the most advanced NVIDIA chip legally available to Chinese companies for large-scale AI model training.

To meet Tencent's sizable order, NVIDIA has faced short-term supply shortages, insiders say. According to Omdia, Tencent and ByteDance ranked as NVIDIA's second and third-largest global customers in 2024, each ordering around 230,000 AI chips — second only to Microsoft, which purchased 485,000 chips.

DeepSeek Integration Fuels Tencent's AI Push

The surge in H20 orders is driven largely by DeepSeek's rising influence. After WeChat integrated the AI model on February 15, several Tencent apps followed suit, including QQ Music, QQ Browser, Yuanbao, Tencent Docs, and Tencent Maps.

Industry insiders suggest Tencent's expanded investment in computing power is aimed at improving user experience across its vast app ecosystem. With Tencent's massive user base, system slowdowns or “server busy” errors could risk user churn — making backend performance upgrades a strategic priority.

Tencent Battles for AI Leadership

DeepSeek's popularity has intensified competition in China's AI landscape. Tencent's Yuanbao AI chatbot recently surpassed DeepSeek to become China's most downloaded iPhone app, according to Bloomberg.

The AI race is heating up among major Chinese tech firms. Alibaba has reportedly started using DeepSeek as a performance benchmark and announced a $53 billion AI investment to accelerate its own AI initiatives.

Despite growing support for domestic AI chip alternatives — fueled by government incentives and supply chain concerns — Tencent's renewed bet on NVIDIA signals its commitment to staying at the forefront of China's AI transformation.