Tencent Investment "Major Restructuring"

The investment sector, which once contributed one-third of Tencent's profits, is quietly "reallocating."

At the beginning of 2025, Tencent's investment strategy shifted from last year's conservative approach, making four significant investments right at the start of the year, each exceeding 100 million yuan. As one of Tencent's important businesses, investment events peaked at 300 per year, almost one a day. However, after reaching its peak in 2021, it quickly "hit the brakes," with only about 20 events last year.

Some keen-eyed investors noticed that two of these investments occurred in the healthcare sector—Libang Pharmaceutical is a new drug development company in the field of nephrology, while Kunwei Technology focuses on innovations in super-resolution imaging technology. According to the Qichacha platform, of the 22 investment events Tencent has participated in from 2024 to date, 9 are in the healthcare sector, even surpassing the hottest AI track.

Investors are puzzled: what is Tencent doing investing in pharmaceuticals?

At the 2023 strategic performance briefing, Tencent's management clearly expressed to shareholders: if there are new investment ideas, they would choose to recycle part of their existing investments for new projects. Simply put, Tencent is no longer using additional funds for investments and will be particularly cautious with new projects. Of the approximately 40 investments in 2023, 40% were additional investments in existing projects.

In such a contracting environment, placing relatively more chips in the pharmaceutical sector shows their determination to "bet" on it.

The explosion of AI and large models is the underlying logic. Jensen Huang, founder and CEO of NVIDIA, has repeatedly emphasized that AI + biology will be "the next astonishing disruptive technology." From a certain perspective, Tencent recognized this earlier; despite the overall downturn in "AI pharmaceuticals" around 2018, it remained one of the few tech giants continuously investing heavily.

With the emergence of ChatGPT at the end of 2022, dozens of vertical medical models have been launched in just two years, significantly improving the efficiency of drug development. AI technology has deeply integrated into various stages, from target discovery and drug molecule design to clinical trials. The industry widely acknowledges that the traditional pharmaceutical sector will gradually shift from an "experience-driven" model to a "data + algorithm" model.

This corresponds to a huge market space. New drug development is known for its high investment and long return cycles; developing a drug often takes over 10 years and costs 1 billion dollars. AI has the opportunity to change all of this.

Tencent's layout in healthcare can be traced back a decade. From internet healthcare to commercial insurance, medical devices, medical big data, and now new drug development, it has reached the "deep water zone." In 2019, Ke Yang, then the director of the Genetics Department at Peking University Cancer Hospital and a foreign academician of the American Academy of Sciences, became one of the nine members of Tencent's board of directors, but media attention was not high.

For a long time, secondary market investors needed to compare Tencent's investment decisions in the medical field with those in the gaming sector to validate its "capability."

First, games have a lifecycle, while pharmaceuticals have a patent protection period; second, both require significant R&D investment; third, both supply sides face regulation, with games needing licenses and pharmaceuticals requiring approvals from the drug regulatory authority; fourth, both demand sides are necessities; fifth, profit margins are relatively high. As a result, Tencent's investment strategy in the gaming sector was also applied here, from game IP, game development, to game distribution, corresponding to pharmaceuticals, CXO (contract research organization), and internet healthcare targeting the user end.

This logic sounds somewhat "forced" and reflects public misunderstanding, with many believing Tencent is merely chasing trends.

However, no one expected this internet company, which started with gaming and social networking, to have delved so deeply into the healthcare sector, and Tencent seems to be surfacing from beneath the water.

Investment Overview

Tencent's investment layout in healthcare can be traced back to 2014.

At that time, it was the inaugural year of internet healthcare startups. In early September 2014, Tencent first invested $70 million in DXY (Dingxiangyuan), and subsequently made investments in several internet healthcare companies, including Weiyi (Guahao.com), Yuanxin Technology, Weimai, Linjia Haoyi, Sipai Health, Penguin Doctor, and Haodf.com. Among them, Tencent has made multiple investments in DXY, Yiyuan Doctor, Yilian, and others, and directly participated in six rounds of investment in Waterdrop Mutual Assistance.

Tencent has almost invested in all the star startups in the internet healthcare field, covering major medical scenarios including patient, doctor, and hospital ends. Additionally, Tencent has also invested overseas in Indian healthcare information service provider Practo, smart medical hardware provider Clinicloud, and Scanadu.

At that time, Tencent's "half-life" was in the hands of its "allies." Li Chaohui, Tencent's vice president and investment management partner, once stated, "We only invest in areas related to Tencent's business, mainly in consumer internet. That is, applications that focus on individuals as users and daily life as scenarios, specifically in areas such as personal clothing, food, housing, transportation, and healthcare."

This logic translates to the investment side as full coverage, with the industry describing Tencent's investment style as "spraying": as long as a popular track is identified, it does not hesitate to invest in multiple companies with the same business. Beyond healthcare services, this investment style has also extended to medical big data, advanced manufacturing, precision diagnostics, and other fields, including companies that may have competitive relationships However, Tencent's entry into the internet healthcare industry is not abrupt, as it quickly formed synergies with its internal products. As early as 2012, Tencent leveraged its massive traffic entrance to collaborate with thousands of hospitals nationwide, launching services such as WeChat appointment registration, payment, and waiting for consultation. In 2014, the WeChat Smart Hospital went live, marking the first shot in Tencent's self-built medical landscape. A series of subsequent investments solidified its service capabilities in this field.

Tencent's strategy at that time was "information connection." From its early investment dynamics, it primarily aimed to build a closed medical platform that tightly connects hospitals, doctors, and patients, from online to offline, through the respective advantages of these invested companies.

After the "infrastructure" was established, Tencent began to accelerate the promotion of its own products in the medical field, successively launching the "four carriages": the smart hardware product "Sugar Doctor" blood glucose meter; the medical insurance "Weibao" underwritten by Taikang Insurance Company; the release of Tencent's Tengai strategy to create a mobile information management platform in the medical field; and providing medical solutions with Tencent Cloud.

In 2019 and 2020, Tencent's investments in healthcare amounted to 14 and 15 respectively, and in 2021, it invested in 20 projects in just one year, with a significantly broader scope, beginning to cover emerging fields such as animal health, stem cells, and pet hospitals.

Subsequently, with changes in overall investment strategy, the pace began to slow down. Until the past two years, it fully shifted towards innovative drug research and development.

Since 2024, investment events in the pharmaceutical field have covered multiple tracks, including ultrasound, biological innovative drugs, cell therapy drugs, and early screening tests. Apart from focusing on medical popular science with Medical Micro Vision and ultrasound imaging equipment with Kunwei Technology, the rest are all related to innovative drug research and development.

This strategic shift is entirely attributed to the explosion of large models and AI.

Jensen Huang's judgment that AI + biology will be "the next astonishing disruptive technology" has become a consensus among technology innovators. Based on data and computation, scientists can reach deeper molecular and reaction levels, which was previously unimaginable.

Tencent's strategy in AI has long been beyond just technology and products; more importantly, it is about "scenarios," with medicine being the core area.

Tencent Vice President Jiang Jie mentioned that scenario applications will become the decisive factor for future (AI) large models. Tencent founder Ma Huateng stated more directly that besides solidly improving the underlying algorithms, computing power, and data of large models, the key is the implementation of scenarios.

"Tencent Cloud has organized over 100 landing application scenarios for generative AI in 13 industries, including finance, education, and medicine, aiming to help inspire enterprises to find and examine entry points suitable for their own business and organization, not missing any opportunity to leverage AI for growth," said Xu Yingdan, Vice President of Marketing for Tencent Cloud and Smart Industry Business Group.

In July 2020, Tencent launched the AI drug discovery platform "Yunshen Zhiyao," utilizing artificial intelligence technology to accelerate the new drug development process. In September 2023, Tencent launched a medical large model, along with an AI product matrix for various scenarios such as family doctor assistants and smart medical imaging platforms Yunshen Zhiyao also disclosed a brand new protein structure prediction algorithm framework tFold, which is equivalent to entering the "deep water zone" of research and development.

This is a resource endowment that large companies naturally possess. Over the past decade, from medical services to medical information technology, and now to the innovative drug sector, Tencent's "ambition" has been growing.

The newly invested Kunwei Technology is a startup in the ultrasound field established in 2019. Its founder Liu Jiajia mentioned that it was precisely by leveraging AI computing power that they broke free from the so-called "impossible triangle" dilemma in the industry, which is the inability to simultaneously improve spatial resolution, enhance penetration, and maintain fast imaging speed.

The proprietary technology of Hong Kong's early cancer detection company Insighta—FRAGMA—not only improves the efficiency of cancer detection but also effectively reduces costs. Its co-founder Chen Junzi mentioned after receiving Tencent's investment that Tencent's technical expertise in AI, combined with FRAGMA technology, will further promote advancements in early cancer diagnosis technology. Tencent Medical Health President Wu Wenda personally serves as a director, highlighting Tencent's strategic intentions.

Pre-planned

Interestingly, Tencent's sensitivity is even greater than that of many leading innovative drug companies.

Just two years after it deeply laid out its innovative drug strategy, several companies in the medical field began announcing their integration with DeepSeek. For example, recently, Fosun Pharma internally launched its self-developed PharmAID decision-making intelligent platform and stated that it has integrated DeepSeek R1, thereby advancing the capability construction of "drug commercial value-assisted decision-making."

Media reports indicate that Heng Rui Pharma even announced a formal document right after the Spring Festival holiday—"Notice on Fully Implementing DeepSeek Applications Within the Company," issued personally by Chairman Sun Piaoyang: requiring the entire company, from headquarters to subsidiaries, and from research and development to sales, to submit detailed AI application plans by February 25, with execution linked directly to personnel assessments.

In addition, companies such as Innovent Biologics, Hezhong Yaoyigou, and Zhiyun Health have also stated their integration with DeepSeek.

"AI pharmaceuticals" are being frequently mentioned again. Around 2014, the first batch of companies applying AI in the pharmaceutical field emerged in China, sparking a wave of industry enthusiasm.

However, it quickly "dissipated." Most pharmaceutical companies and investors had little understanding of this new phenomenon. The founder of "the first AI pharmaceutical stock" Jingtai Technology, Ma Jian, once told "China Entrepreneur," that the biggest challenge at the beginning of entrepreneurship was how to explain AI pharmaceuticals to clients and investors In 2020, although the industry made some substantial progress by developing some preclinical candidate compounds using AI, the secondary market only welcomed two "AI pharmaceutical" concept stocks, which did not create much of a stir. It wasn't until the emergence of ChatGPT and the debut of DeepSeek earlier this year.

In 2023 alone, NVIDIA invested in eight drug discovery or AI pharmaceutical startups, including Generate Biomedicines and Genesis Therapeutics, and launched a cloud-based generative AI platform—BioNeMo, aimed at achieving faster drug discovery and design.

"Since the computer-aided design industry has produced the first chip company with a market value of $2 trillion, why can't computer-aided drug discovery create the next trillion-dollar pharmaceutical company?" said Kimberly Powell, Vice President of Healthcare at NVIDIA.

Many international tech giants, after the large models led by ChatGPT gained popularity, have regarded the drug development field as one of the first core landing scenarios. In addition to NVIDIA, Microsoft, Amazon, and Google have also launched their own AI pharmaceutical platforms in the past two years.

Although currently, in terms of commercial landing, large medical models still face many challenges in practical applications, it is clear that everyone has collectively realized the enormous market potential of "AI + medicine" for the first time.

In 2017, Tencent launched its first product applying artificial intelligence technology in the medical field—Tencent Medical Imaging. This product mainly targets medical imaging, an area where AI can relatively easily intervene. Utilizing computer vision and deep learning technology, it conducts deep learning and training on various medical images to assist doctors in disease screening and diagnosis.

That was also the hottest "AI + medicine" sub-track at the time. In 2021, Tencent Medical Imaging even outpaced "professional players" by obtaining the first AI Class III certification for pneumonia CT imaging auxiliary triage and assessment software, while companies like Yitu Healthcare and Andon Health experienced sell-offs, bankruptcies, restructuring, or failed IPOs afterward.

Amidst the industry's gloom, Tencent's upgrade in the healthcare sector has shifted from "pioneering trials" to "full embrace." Ma Huateng stated, "We initially thought that (artificial intelligence) was an opportunity that comes once in a decade for the internet, but the more we think about it, the more we feel it is an opportunity that comes once in hundreds of years, similar to the industrial revolution that invented electricity."

Now, they are leading by a position, entering the most challenging pharmaceutical field.

"There are many scenarios that can adapt to large models, and we will carefully consider whether we should do it ourselves. For some deeply clinical and particularly complex scenarios, we have the capability to do it, but it should be left to companies with more comparative advantages. After all, Tencent's greatest advantage lies in its 'connectivity' capability," said Wu Wenda. This is the underlying logic for Tencent's investment in the pharmaceutical field.

Therefore, this time, when shifting to innovative drugs, Tencent may have been "planning for a long time." Author of this article: Tan Liping, Source: China Entrepreneur Magazine, Original Title: "Tencent's Investment 'Major Restructuring'"

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