Despite US Limits On China's Access To Nvidia Chips, Tech Titans Like Alibaba And Tencent Ramp Up AI Investments

In the face of U.S. sanctions, Chinese tech giants have doubled their capital expenditure in 2024, with a heavy focus on artificial intelligence (AI) infrastructure.

What Happened: Alibaba BABA, Tencent TCEHY, and Baidu BIDU together invested 50 billion Chinese yuan ($7 billion) in the first half of 2024, a significant increase from 23 billion Chinese yuan ($3.22 billion) the previous year. The investments are primarily directed towards processors and infrastructure for training large language models for AI, the Financial Times reported on Monday.

ByteDance, the parent company of TikTok, has also increased its AI-related expenditure, utilizing its $50 billion cash reserve and relative freedom from investor scrutiny.

Despite U.S. export controls limiting access to Nvidia Corp‘s NVDA leading AI processors, Chinese tech giants are acquiring lower-performance processors like Nvidia’s H20. Analysts predict Nvidia will ship over a million of these processors to Chinese tech groups in the coming months.

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Why It Matters: The ramped-up investment in AI by Chinese tech giants is a response to Chinese President Xi Jinping’s call for the country to boost its innovation capabilities amid the ongoing chip dispute with the U.S. Jinping pointed out that “some key, core technologies are controlled by others,” indicating a lack of top scientific and technological talents.

Chinese AI developers have also found ways to access advanced Nvidia Corp chips without importing them into China, leveraging computing power abroad through brokers.

Since 2023, Alibaba and Tencent have directed a significant portion of their deals in China towards AI startups, marking record-high investments in the sector for both companies. This shift in focus comes at a time when the two tech giants have been scaling back their investments due to regulatory challenges, the impact of the COVID-19 pandemic, and a slowing Chinese economy.

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Photo by William Potter on Shutterstock

This story was generated using Benzinga Neuro and edited by Pooja Rajkumari