During Tencent's European roadshow hosted by Goldman Sachs, Chief Strategy Officer James Mitchell demonstrated to investors how AI technology has become the core engine driving growth across the company's business lines, including AI-powered gaming development efficiency improvements and advertising technology platform upgrades.

On August 25, Goldman Sachs stated in its latest research report that during Tencent's European roadshow from August 18-22, Chief Strategy Officer James Mitchell indicated that Tencent demonstrates significant cost advantages in AI infrastructure, achieving lower AI inference costs through dynamic model routing, with the Hunyuan 3D model ranking prominently on Hugging Face.

Goldman Sachs noted that key signals released by Tencent's Chief Strategy Officer during the European roadshow also include: AI technology will be deeply integrated into the WeChat ecosystem while driving gaming development efficiency improvements, advertising conversion rate enhancements, and high-quality growth in cloud services. Goldman Sachs forecasts that Tencent's 2025 revenue and earnings per share will grow by 13% and 18% respectively.

Based on this, Goldman Sachs' analyst team emphasized that comprehensive AI empowerment provides long-term growth runway for all business lines, strengthening Tencent's position as a beneficiary of AI applications among Chinese internet companies. The firm maintains a buy rating on Tencent with a target price of HK$701.

**AI Infrastructure Investment Demonstrates Significant Cost Efficiency Advantages**

Goldman Sachs stated that Tencent demonstrates significant cost advantages in AI infrastructure. The company employs a dynamic model routing strategy, directing queries to models of different cost tiers—from deep reasoning models down to Turbo models and then to refined models.

In search operations, most queries are now processed through responses from Turbo models, which can also run on lower-cost refined models. Long-term, the shift toward lower-cost model combinations will further support improvements in inference cost efficiency.

Regarding GPU configuration, the company primarily uses overseas chips, with the remainder utilizing domestic chips.

Management expressed no concerns about chip capacity, stating that computing power supply for internal demand is sufficient, while the company can also utilize domestic chips for inference. This year's capital expenditure targets will depend on chip supply conditions.

**Hunyuan Model Leads Multimodal Development**

Tencent's self-developed Hunyuan 3D model has achieved leading rankings on the Hugging Face platform, with research and development focus spanning from text foundation models to multimodal/physical world training.

AI technology has achieved efficiency improvements in multiple key areas: enhancing click-through rates in advertising business, accelerating content generation in game development, and significantly improving code generation efficiency.

The company plans to cautiously integrate AI further into the WeChat ecosystem, prioritizing user experience and security. This gradual integration strategy reflects Tencent's emphasis on the stability of its super app ecosystem.

**AI Drives Content Production Revolution**

AI has brought significant content production efficiency improvements to game development. While code can be auto-generated, manual debugging remains important, and prototype development speed will further accelerate in the future. For existing games, AI-enhanced virtual teammate functionality can improve user experience.

Regarding the domestic gaming market, China has 400-500 million monthly active users for app games and 500 million monthly active users for mini-games, totaling 700 million users participating in app games and mini-games. Management sees potential in converting mini-game users to app game users.

For "VALORANT" mobile, user base and user experience are priorities for the first year of operations, with monetization being a gradual process. The company aims to extend game lifecycle by leveraging the strong fan base from PC platform and dedicated mobile esports events.

International gaming business benefits from gradual recognition of strong 2024 revenue and new content updates for evergreen games. Supercell's previous restructuring has reactivated multiple evergreen IPs such as "Brawl Stars" and "Clash Royale."

**AI Upgrades Drive Advertising Growth**

Tencent recently upgraded its advertising foundation model to drive better conversion results, primarily in two aspects:

Content consumption analysis (how users browse/like articles) and commercial behavior analysis (speed at which users click ads).

The AI-led advertising technology upgrade platform can drive advertising growth beyond industry averages by improving click-through rates across Tencent's multiple advertising inventories, offsetting AI-related depreciation impacts.

Long-term, the company expects AI to create monetizable intent recommendation/agent prompt functionality.

In cloud business, Tencent is shifting toward value-added software/inference efficiency. The company believes Tencent Cloud's profit margins domestically are healthy, with room to re-accelerate revenue growth on a higher quality basis depending on computing capacity conditions.

Goldman Sachs' analyst team believes that Tencent's unique WeChat ecosystem and global gaming assets, combined with multiple monetization levers, will enable the company to achieve compound earnings growth through macro cycles.