Tencent Plows More Cash Into AI Chip Startup

Chinese tech giant Tencent Holdings Ltd. has doubled down on efforts to expand its chip-making ecosystem by taking part in a 700 million yuan ($99 million) fundraising round for a Shanghai-based tech startup.

Enflame, a company which specializes in making chips for AI training and inference, announced its series B (link in Chinese) funding round on Thursday. Although Tencent was not the lead investor and its actual level of funding remains undisclosed, it previously led a round worth 340 million yuan and later participated in a 300 million yuan round. The new funding marks the third time in two years it has invested in Enflame.

Tencent’s capital injection into Enflame came as comparable tech giants including domestic peers Alibaba and Baidu, as well Amazon and Google parent Alphabet have all redoubled their AI chip efforts.

By buying into startups, Tencent differs from its peers, which generally opt for in-house development. Alibaba, Huawei, Baidu and Alphabet have all recently begun using their own AI chips.

Investing in startups is a more “efficient” way for Tencent to get into a field in which it is a relative latecomer, compared to pricier in-house development, said another Enflame investor.

Prior to its December acquisition by Intel, Israeli AI chip startup Habang was approached by Tencent regarding a potential takeover, according to people familiar with the matter.

Tencent’s further investment in AI chips comes as the company, like its peers, is generating increasing revenue from offering cloud services to businesses, an area in which such chips are used.

Tencent is one of Enflame’s largest shareholders, according to public documents. Enflame released an AI chip product in December which is set to be tested with Tencent’s servers for future use, according to the Enflame investor. It is important that Tencent serves both as an investor and client, the investor said.

Enflame’s latest fundraising follows that of many similar AI startups this year. In the past two months, at least three Chinese AI startups have revealed the results of their latest fundraising rounds, including voice-recognition specialist AISpeech, which said last month that it had raised 410 million yuan in a series E round. That followed similar announcements by peers 4Paradigm and Intellifusion, which said they had raised $230 million and 1 billion yuan, respectively.

Contact reporter Mo Yelin (yelinmo@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)