(Yicai) Aug. 14 -- Shares of Tencent Holdings, China’s most valuable company, reached their highest in more than four years after the internet giant posted better-than-expected earnings for the second quarter, thanks to further artificial intelligence enhancements at its gaming and advertising businesses.

After opening 2.4 percent higher at HKD600 (USD76.45) a share, the highest since April 8, 2021, Tencent [HKG: 0700] closed up 0.7 percent at HKD590 in Hong Kong today. The stock has gained 41 percent since the end of last year, valuing Tencent at HKD5.4 trillion (USD688.5 billion). It became China’s most valuable company in March.

Net profit jumped 17 percent to CNY55.6 billion (USD7.7 billion) in the three months ended June 30 from a year earlier, the Shenzhen-based company said in an earnings report released yesterday. Revenue climbed 15 percent to CNY184.5 billion (USD25.7 billion). That beat market expectations for CNY50.8 billion and CNY178.9 billion, respectively.

“Our games performed well in terms of users and revenue as evergreen games such as Honor of Kings and Peacekeeper Elite evolve into platforms while increasing their usage of AI, and as new games such as Delta Force broke out,” said Chairman and Chief Executive Pony Ma.

Tencent said AI helped it to create gaming content faster, make in-game characters feel more real, and run smarter marketing, resulting in more players and higher income. Gaming revenue from the Chinese market rose 17 percent to CNY40.4 billion, while that from overseas markets soared 35 percent to CNY18.8 billion.

“Our marketing services revenue sustained rapid growth as we upgraded our advertising foundation model, leading to better performance of advertisements across our traffic platforms,” Ma also said.

The company expanded its AI capabilities for ad creation, placement, recommendation, and performance analysis, improving click-through and conversion rates, boosting advertisers’ returns on investment, and growing its marketing services revenue by 20 percent to CNY35.8 billion. Income from financial technology and business services rose 10 percent to CNY55.5 billion.

Investment in AI also increased in the second quarter. Tencent’s capital expenditure soared 119 percent year on year to CNY19.1 billion, up from a 91 percent increase in the first quarter. The money was mainly spent on AI-related infrastructure, such as chips and data centers.

The company has enough chips to train and continuously upgrade its AI models, President Martin Lau said on its earnings conference call. Tencent is boosting AI inference efficiency through software optimizations, enabling more workloads to run on the same chip capacity, he added.

Editors: Dou Shicong, Futura Costaglione