Tencent proposes notes amid $5 billion AI-capex discussions

Tencent Holdings has proposed an international offering of notes to professional investors under its global medium-term note programme. The company said it had not entered a binding agreement and warned that the issue may not proceed.

People familiar with private investor discussions said the offering could total about US$5 billion. They said the proceeds would mainly support artificial-intelligence capital expenditure, with most of that spending directed to chip purchases. The possible mix included US$1.5 billion to US$2 billion in dollar tranches and 20 billion yuan to 25 billion yuan in offshore-yuan notes, with pricing possible as early as October 13. Tencent’s October 12 filing did not disclose those figures or the spending plan.

Tencent said the notes could be issued in series with different dates and terms and denominated in any currency, subject to applicable requirements. Completion depends on global market conditions, the company’s financing needs and investor interest.

In a June programme update, Tencent said net proceeds from each notes issue would be used for general corporate purposes unless the pricing supplement for a particular issue specified another use. No use of proceeds appears in the October 12 announcement.

The proposed financing follows a sharp increase in Tencent’s investment spending and adds a debt-market dimension to broader AI financing activity in China. Tencent’s October filing lists first-half capital expenditure of RMB96.3 billion, equivalent to US$14.2 billion. Tencent’s second-quarter results showed quarterly capital expenditure of RMB52.8 billion, up 176% from a year earlier, and negative free cash flow of RMB13.8 billion; the company said operating cash flow included large AI-related prepayments for computing infrastructure.