WPIC’s CEO on Bloomberg: China’s Ad Spending Remains Strong

Bloomberg:
Somebody asked me a question earlier today that fits into the Tencent story so well, which is: we’ve been so focused on the movement of chips across borders (or lack thereof) that we haven’t really talked about the movement of software.

When I think about Tencent and the gaming portfolio in particular, are there Chinese domestic companies that are getting international footholds across e-commerce, gaming, and other digital businesses?

Jacob Cooke:
Definitely. Tencent itself is one of them. Their major investment in Shopee has made them a leading player in Southeast Asia’s e-commerce market.

Tencent is also capturing a large share of advertising dollars coming from China’s e-commerce boom. They’re not as much of a B2B software player as Alibaba, which has a whole suite of business tools. But in advertising, Tencent is becoming a bigger and bigger force.

We saw their advertising revenue rise 5% this quarter. Meta’s recent earnings pointed to some softness in advertising, with a pullback from Chinese advertisers in Europe and, to some extent, the United States, likely due to the geopolitical climate. But when I look at Tencent, I don’t see the same macro-level headwinds.

Bloomberg:
Do you?

Jacob Cooke:

No. What’s really happening is that much of that advertising is still domestic. China’s coming out of a year of substantial government and e-commerce stimulus, and we should naturally see the effects trickle down into stronger performance in the third and fourth quarters.

China never had the kind of massive post-COVID stimulus we saw elsewhere, and they took their time. Now we’re seeing solid numbers, and I’d expect that to continue. Low inflation also bodes well for consumers, which is encouraging.

We’re pretty optimistic about Tencent’s earnings, and we expect more good news from China’s e-commerce platforms in the coming weeks.

Bloomberg:
Yes, we’re watching for Alibaba’s results later this week.

Jacob, I also want to ask about access to GPUs. How much might AI and generative AI development be limited by the infrastructure they need? Tencent suggested they have all the chips they require for inference and aren’t worried about it. They wouldn’t go into details about Nvidia access, though. Is that a concern?

Jacob Cooke:
We’ve all talked about this, but we’ve now seen several successive Chinese models like Alibaba’s Qwen1 performing strongly in their ability to code. They’re taking a slightly different approach than Alibaba, but companies like DeepSeek are also competing internationally despite the chip restrictions.

So if Tencent says they have all the chips they need, there’s no reason not to believe them.

Bloomberg:
More broadly, the geopolitical tensions don’t seem to be slowing these Chinese companies down. They’ve all recovered significantly from their lows.

Jacob Cooke:
That’s right. From our perspective, being on the ground in China, we see two realities. At the high government level, relations are tense, and that’s what dominates headlines. But locally, business activity remains strong.

People-to-people connections are still very good, and many international companies are setting new sales records in China. The headlines don’t always reflect what’s happening on the ground. Many of these business relationships have been built over decades, and they’re holding steady.

We expect this current tension to pass, much like it did during the first Trump administration, and business will continue as usual.

Bloomberg:
In the US, President Biden recently talked about a “pay-to-play” arrangement where the CEO of Nvidia agreed to share revenue in exchange for access to the Chinese market. In a Chinese trade or tariff dispute, do tech leaders there publicly acknowledge their government’s policies in the same way?

Jacob Cooke:
No, not at all. In fact, the approach is almost the opposite. China has long maintained export tax credits, effectively lowering prices for international consumers instead of taxing exports.

Despite the political noise, companies haven’t really faced major issues getting the access or resources they need. Pricing remains stable in the Chinese market.