According to reports, Tencent is considering issuing up to $5 billion in offshore bonds, which may be denominated in U.S. dollars and offshore renminbi, with issuance potentially occurring as early as this month. Chinese tech giants are seizing the window of low funding costs to lock in capital, with most funds directed toward infrastructure such as data centers and chips.
$TENCENT (00700.HK)$ Reports indicate that the company is considering issuing up to $5 billion in offshore bonds, marking the latest instance in a new wave of intensive fundraising among China's leading technology firms.
Citing sources familiar with the matter, Sina Finance reported that Tencent is considering issuing up to $5 billion in offshore bonds. These bonds may be denominated in U.S. dollars and offshore renminbi, with issuance possibly taking place as early as this month. In June, Tencent raised nearly $4.7 billion through the issuance of long-term U.S. dollar and renminbi bonds, marking its largest debt offering since 2020. The proceeds were primarily used for debt refinancing and general corporate purposes, including the development of AI products and services.
Previously, Alibaba, ByteDance, and DeepSeek completed large-scale financings in successive months, with the four transactions totaling approximately $56 billion (nearly RMB 400 billion). The capital is directed toward a single objective: expanding AI infrastructure. These companies are not short of cash; rather, they aim to lock in the capital needed for AI expansion over the coming years during a period of low funding costs, avoiding the need to wait for gradual business cash flows.
Tencent: Using Debt to Create Strategic Flexibility
In the second quarter of this year, Tencent's capital expenditure reached RMB 52.8 billion, a 176% year-on-year increase, primarily allocated to AI projects and computing power construction, resulting in a negative free cash flow of RMB 13.8 billion. Meanwhile, the company repurchased approximately HKD 16.9 billion worth of shares in the same quarter. With simultaneous advancements in AI investment, shareholder returns, and external investments, external financing can alleviate the short-term pressure of competing expenditures.
Regarding its debt structure, Bloomberg data indicates that Tencent currently has approximately $22 billion in outstanding offshore notes. There are no public bond maturities due this year, with one U.S. dollar bond maturing in 2028. If the proposed issuance of up to $5 billion in bonds proceeds, it will further bolster its cash reserves.
In terms of AI product strategy, Tencent is catching up with ByteDance and Alibaba, including plans to launch Hy4 in late 2026. Tencent currently operates one of the largest AWS-like cloud services in China, providing computing power to clients interested in building their own AI platforms.
Four Giants, Four Financing Paths
During the same period, Alibaba, ByteDance, and DeepSeek also completed substantial financings, but each employed different financing instruments and strategic rationales.
According to Bloomberg, ByteDance signed a $29.6 billion syndicated loan in September with an initial tenor of three years, extendable to five years. The spread was set at SOFR plus 68 basis points, representing a 17-basis-point reduction compared to a $10.8 billion loan facility secured in 2024. Twenty-eight banks participated in the deal, with 15 Chinese banks committing a total of $18.9 billion, accounting for 64% of the facility. Banks were willing to assume ByteDance’s credit risk at a lower spread, allowing the company to expand its investments without diluting equity. Reuters reported that ByteDance also secured capacity in advance through binding off-take agreements for multiple data center projects in Southeast Asia, with part of the loan proceeds allocated to overseas projects.
Alibaba completed an HK$80 billion placement in late August, issuing 710 million new shares at HK$112.70 per share. The company disclosed that approximately 60% of the net proceeds would be used to expand global computing infrastructure, while the remaining 40% would fund large-scale AI data centers and upgrades to storage, database, and network systems. Equity financing has no fixed repayment date, making it the most flexible funding option for infrastructure businesses undergoing rapid expansion. In the June quarter, Alibaba’s AI cloud and computing services revenue reached RMB 48.4 billion, a 45% year-on-year increase. Annualized revenue from AI-related products exceeded RMB 49.5 billion, providing revenue support for this expansion.
DeepSeek’s financing logic differs. According to Bloomberg, DeepSeek’s second round of financing initially targeted approximately RMB 50 billion. Due to subscription exceeding expectations, signed term sheets indicate the final size may approach RMB 100 billion, with Tencent and CATL as the leading investors. The company’s first round of external financing, completed in June of this year, amounted to approximately RMB 51 billion, marking the first introduction of external capital since its establishment nearly three years ago.
Capital Flow: Infrastructure Layer Absorbs the Majority
The majority of the funds raised in this round will be allocated to hardware and infrastructure layers rather than the models themselves.
DeepSeek is planning a data center with a capacity of approximately 1 GW in Ulanqab, Inner Mongolia, intending to deploy at least 160,000 Huawei Ascend 950DT chips. The order value is approximately $2.56 billion. According to Bloomberg, these chips are primarily intended for inference tasks, while training still relies on NVIDIA. Due to supply constraints on high-end memory such as HBM, full delivery of the order is expected to take more than a year. DeepSeek aims to bring part of this computing power online between late 2027 and early 2028.
Upstream suppliers have been the first to benefit. According to the prospectus of Yangtze Memory Technologies (YMTC), the gross margin for its NAND products reached 78.73% in the first quarter of 2026. In the first half of 2026, ChangXin Memory Technologies (CXMT) reported a gross margin of 84.84% for its core business, with net profit increasing significantly year-on-year.
Meanwhile, the scale of global AI-related debt issuance is also expanding rapidly. According to a recent report by Goldman Sachs credit strategists, total global AI-related debt issuance exceeded $575 billion in 2026. Last month, SoftBank raised the equivalent of approximately $11.1 billion through one of the largest corporate high-yield bond issuances on record to support its AI expansion plans.