Tencent Leverages Datasection’s Data Centers in Osaka and Sydney to Access Nvidia’s Latest GPUs Amid U Export Restrictions

• Why Is Tencent Turning to Offshore Data Centers for GPU Access?
• How Did Datasection Become a Major Player in AI Infrastructure?
• What Are the Financial and Strategic Implications of This Deal?
• How Are U.S. Export Policies Shaping the Global AI Landscape?
• What’s Next for Datasection and Tencent?
• FAQs

strategic move to bypass U.S. export restrictions, Tencent is tapping into Datasection’s data centers in Osaka and Sydney to secure cutting-edge Nvidia GPUs. This partnership highlights the growing demand for AI infrastructure and the creative solutions Chinese tech giants are employing to stay competitive. With Datasection’s stock soaring and plans to expand its GPU fleet to 100,000 units, the race for computational power is heating up. Here’s a deep dive into the deal, its implications, and what it means for the future of AI development.

Why Is Tencent Turning to Offshore Data Centers for GPU Access?

Tencent, along with other Chinese tech giants like Alibaba and ByteDance, is increasingly relying on offshore data centers to access high-performance Nvidia GPUs. U.S. export restrictions have made it nearly impossible for these companies to procure the latest chips domestically. Datasection, a Japanese firm that pivoted from marketing solutions to AI infrastructure, has emerged as a key player in this space. Their Osaka and Sydney facilities house thousands of Nvidia’s Blackwell and B300 chips, which are off-limits to China due to geopolitical tensions. This workaround allows Tencent to continue training its AI models without interruption.

How Did Datasection Become a Major Player in AI Infrastructure?

Datasection’s transformation from a marketing solutions provider to an AI infrastructure powerhouse is nothing short of remarkable. Last year, the company shifted its focus and quickly secured over $1.2 billion in contracts linked to Tencent through an external partner. Their first batch of 15,000 Blackwell processors, stationed in Japan, has already been snapped up by Tencent under a three-year agreement with extension options. CEO Norihiko Ishihara noted that the demand for GPUs has skyrocketed, with the minimum requirement doubling from 5,000 to 10,000 chips in less than six months. This surge reflects the breakneck pace of the AI market and the lengths companies will go to secure computational resources.

What Are the Financial and Strategic Implications of This Deal?

The financial stakes are enormous. Datasection’s stock has surged by 185% this year, though it has dipped from its summer peak amid concerns over overinvestment and a short-seller attack. The company is raising ¥50 billion through warrants issued to First Plus Financial Holdings, a Singapore-based investor, which could dilute equity by up to 200%. Despite these challenges, Datasection is pressing ahead with ambitious expansion plans, including a hyper-scale AI cluster in Sydney featuring Nvidia’s B300 chips. Tencent is expected to be the primary user of this facility, which Ishihara claims will be the world’s first of its kind.

How Are U.S. Export Policies Shaping the Global AI Landscape?

U.S. export restrictions have forced Chinese tech firms to get creative. While the Biden administration recently approved the sale of a lower-tier Nvidia chip to China, analysts like Lin Qingyuan of Bernstein Research argue that offshore leasing will remain a popular option. Datasection’s ability to pivot and secure U.S. Commerce Department and Nvidia approvals for its GPU usage underscores the adaptability of these firms. However, the geopolitical risks loom large. Ishihara admits that stricter U.S.-China regulations could force Datasection to halt operations temporarily, though he remains bullish on the long-term value of their assets.

What’s Next for Datasection and Tencent?

Datasection isn’t stopping at Asia. The company is eyeing Europe and has even brought on Spanish politician Pablo Casado Blanco as chairman and John Ellis Bush Jr. to its board. Meanwhile, Tencent continues to emphasize its compliance with international laws, stating that its use of cloud computing services is “transparent and legal.” As the demand for GPU power grows, both companies are betting big on the future of AI. Whether through offshore data centers or domestic workarounds, the race to secure computational resources shows no signs of slowing down.

FAQs

Why is Tencent using Datasection’s data centers?

Tencent is leveraging Datasection’s facilities in Osaka and Sydney to access Nvidia’s latest GPUs, which are restricted from export to China due to U.S. policies.

How many GPUs does Datasection plan to operate?

Datasection aims to deploy over 100,000 Nvidia GPUs in its future installations, with the first 15,000 chips already allocated to Tencent under long-term contracts.

What are the risks for Datasection?

Datasection faces potential operational halts if U.S.-China trade policies tighten further. Additionally, its stock has been volatile due to concerns over overinvestment and short-seller attacks.

Is Tencent’s use of offshore GPUs legal?

Tencent asserts that its cloud computing practices comply with all applicable laws and regulations, describing them as “transparent and legal.”