Report: TENCENT (00700) is marketing a $5 billion bond offering, with most of the proceeds to be used for chip procurement.

According to media reports, TENCENT (00700) has begun marketing a U.S. dollar and offshore renminbi bond offering that is expected to raise about $5 billion to support its growing investments in artificial intelligence (AI), with most of the AI investment to be used for chip procurement. The bonds are expected to be priced as early as October 13. The report, citing people familiar with the matter, said Tencent has set initial price guidance for its planned 10-year and 20-year U.S. dollar bonds at about 115 and 140 basis points above comparable U.S. Treasuries, respectively. In addition, Tencent is also marketing 10-year and 30-year offshore renminbi bonds, with price guidance of around 2.9% and 3.5%, respectively. It is understood that Tencent's capital expenditure may remain high for the remainder of this year and into 2027, meaning that based on the level in the second quarter of this year, its annual spending will be slightly above RMB 200 billion. This bond issuance is part of a broader wave of global technology companies raising funds for AI-related projects. However, investors are increasingly concerned about whether spending on data centers, chips and model development can generate sufficient returns.