Cheap coal-fired electricity plus cheap funding plus a national strategy of distilling frontier AI models make for a formidable competitor.
From Bloomberg via The Japan Times, October 14:
Tencent Holdings is leaning into cheap offshore yuan debt to bankroll its artificial-intelligence infrastructure, the latest prominent example of leading Chinese technology firms using that edge over global rivals.
The Chinese technology giant sold nearly $5.7 billion of bonds this week to support its AI investments in its largest offering in more than six years. In a shift from its previous debt sales, the deal was dominated by dim sum notes, which carried lower borrowing costs.
Tencent priced 26 billion yuan ($3.9 billion) of offshore yuan securities on Tuesday, with its 10-year and 30-year portions carrying coupons of 2.4% and 3%, respectively, well below the more than 6% yields on the dollar notes. In all, the yuan tranche accounted for more than double the amount raised in the dollar portion.
Tencent’s growing preference for dim sum bonds is part of a wider trend among borrowers seeking cheaper yuan financing as dollar yields surge. That could help fuel Chinese technology companies’ spending on AI-related projects. Other firms that are investing heavily in AI, such as Alibaba Group Holding and Kuaishou Technology, have also raised money in the dim sum debt market over the past two years.
Chinese technology companies are taking advantage of the lower funding costs at a time of abundant offshore yuan liquidity, said Zerlina Zeng, head of Asia credit strategy at Creditsights Singapore. New issues from the sector will likely remain strong over the next 12 months as they further ramp up capital expenditures, she said.
The availability of cheap funding is becoming an even more critical factor in the global AI race as concerns mount over the risks tied to the massive wave of AI investment and debt issuance. Broadcom CEO Hock Tan warned this week that insufficient capital could become the next constraint on the industry’s growth....
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Also at The Japan Times October 14:
U.K. and Indian economies set to overtake Japan, IMF says
