Tencent to Boost Middle East Cloud Investments Amid Regional AI Push

(Bloomberg) -- Tencent Holdings is looking to expand its cloud business in Saudi Arabia and the United Arab Emirates, in a bet that a focus on developing industries including artificial intelligence in the Middle East will require huge new investments in data storage.

Tencent’s investments in the region are “still in this nascent stage,” but are set to pick up quickly, the firm’s Senior Executive Vice President Dowson Tong said in an interview in Riyadh.

“We are going to announce more throughout the year,” he said, declining to give further details. “We see a lot of potential in this market so will be increasing our investment.”

Cloud businesses including Amazon Web Services and Alibaba have been making significant inroads in Saudi Arabia over the past few years as the country looks to become a hub for internet traffic. 

Alibaba and Saudi Telecom Company partnered to launch Alibaba Cloud last year with $238 million capital to invest in building cloud computing infrastructure. Meantime, Amazon announced plans to invest $5 billion to build cloud storage earlier this year. 

Tencent – one of many Chinese firms increasing their presence in Saudi Arabia – will initially focus on offering cloud storage to entertainment and gaming companies, Tong said. 

Related:Amazon Leads Firms Investing $10B In Saudi Data Centers

The company, China’s largest internet firm, will look at building out storage both for external customers and for its own growing operations in the country. It recently launched an Arabic version of Honor of Kings, one of its most popular mobile games with more than 100 million daily active users.

AI Push

Part of Tencent’s offering in the Middle East will be computing power for artificial intelligence applications, an area that both the UAE and Saudi Arabia are investing in heavily, including developing Arabic large language models. 

Abu Dhabi is also setting up a technology investment firm called MGX targeting deals in AI and semiconductors that could surpass $100 billion in assets under management in a few years. Saudi Arabia’s Public Investment Fund is in talks with venture capital giant Andreessen Horowitz to invest up to $40 billion in AI.

“AI is the buzzword here,” Tong said, adding that the company was investing “very aggressively” in the field. Some of its customers in the region are already using its data centers to train AI models, he added.

Tencent, alongside regional peers, has been exploring the potential of generative AI. The firm’s in-house large language model, Hunyuan, is now integrated with a suite of products including search and online marketing. 

Related:Microsoft Plans Its First Cloud Data Centers in Middle East