Tencent admits GPUs only pay for themselves when powering personalized ads

"If we buy GPUs and we deploy them into our ad tech, then that's a relatively short-cycle investment. The GPUs yield better targeting, higher click-through rates and higher revenue and profit on a pretty accelerated basis, he said. But the company views GPUs powering work on its Hunyuan foundation model as important for our franchise. Mitchell said Tencent is comfortable with this situation."

"There's been many products within Tencent that went through lengthy incubation periods where they had no return on investment, but we were confident in the franchise value creation, he said. And then over time, they had more lengthy harvesting periods where we've been able to drive very healthy returns on that sunk investment. He predicted that AI will go through the same cycle."

"But Tencent is struggling to make the wheel turn because it's only had enough GPUs to power its own services, leaving its public cloud without enough accelerators to rent to customers. Mitchell said Chinese manufacturers will soon fill the gap. As the supply of China design GPUs progressively ramps up, then we'll be remedying that situation, he said."

"Chief financial officer Shek Hon Lo weighed in with an observation that two factors made it hard for Tencent to get all the GPUs it wants: US sanctions, and limited fab capacity within China. That's now being addressed because the China designed ASICs are seeing more supply from fabs within China as well as more supply from fabs in neighboring countries, he said. But Tencent still expects GPU procurement to be harder than buying CPUs, as Lo said the company has very long-term deals with CPU vendors."

Tencent struggles to earn returns on GPU investment unless GPUs are used to power its advertising business. Deploying GPUs into ad tech creates a short-cycle investment with improved targeting, higher click-through rates, and higher revenue and profit. GPUs used for work on the Hunyuan foundation model are treated as important for franchise value creation, with Tencent comfortable with longer incubation and harvesting cycles. Tencent lacks enough GPUs to power its own services and also supply its public cloud, limiting accelerator availability for customers. Chinese manufacturers are expected to fill the gap as China-designed GPU supply ramps up. Procurement is constrained by US sanctions and limited fab capacity, though China-designed ASIC supply is improving. Tencent expects GPU procurement to remain harder than CPU buying due to long-term CPU vendor relationships.

Read at www.theregister.com