China\u2019s most-valued company is losing favour with equity investors due to concerns that it is falling behind in the nation\u2019s increasingly competitive artificial intelligence race.<\/p>\n
Shares of Tencent Holdings have slumped nearly 11% in Hong Kong this year, trailing a broader tech gauge. They fare even worse when compared to Alibaba Group Holding and Baidu \u2014 both of which have seen their shares rise in part due to optimism over their AI apps. In all, $173 billion in market value has been wiped out since Tencent\u2019s stock reached a more than four-year high in early October.<\/p>\n
Tencent\u2019s owners are taking notice. Breaking with past practice, the company has joined an ongoing rush among tech firms to hand out so-called red packets to woo prospective users to their AI tools during the upcoming Lunar New Year break. Tencent plans to spend 1 billion yuan ($145 million) on the campaign.<\/p>\n
| Company<\/th>\n | AI Tool<\/th>\n | Year-to-Date Stock Performance<\/th>\n<\/tr>\n |
|---|---|---|
| Alibaba<\/td>\n | Qwen<\/td>\n | +11%<\/td>\n<\/tr>\n |
| ByteDance<\/td>\n | Doubao<\/td>\n | Not listed<\/td>\n<\/tr>\n |
| Tencent<\/td>\n | Yuanbao<\/td>\n | -11%<\/td>\n<\/tr>\n |
| Baidu<\/td>\n | Ernie Bot<\/td>\n | +6.5%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n \u2018But investors seem disenchanted with the firm\u2019s relatively conservative AI strategy. Unlike Alibaba and TikTok owner ByteDance, which have plowed billions into AI infrastructure and product roll-outs, Tencent has taken a more measured approach that focuses more on integrating AI into its core services like game publishing and the social media platform WeChat.<\/p>\n And to some, the proposed spending on red packets is also raising concern about profit margins.<\/p>\n \u201cMargin risk is a reality now, in addition to losing the AI race to Alibaba and ByteDance,\u201d said Felix Wang, tech sector head at Hedgeye Risk Management. \u201cI\u2019m worried about the new AI coupon war. Tencent catches my eye because usually they are not involved in these big spending wars.\u201d<\/p>\n What Bloomberg Intelligence says:<\/p>\n \u201cAlibaba, Baidu and Tencent\u2019s $650 million Lunar New Year \u201cRed Packet\u201d AI promotions will further delay the sector\u2019s path to profitability. The identical playbooks adopted by China\u2019s leading AI firms \u2014 free products paired with cash giveaways \u2014 reflect a sector defined by cutthroat competition, leaving consumers as the primary beneficiary of the industry\u2019s high-stakes drive for dominance,\u201d Robert Lea, senior analyst<\/p>\n Tencent\u2019s AI app is clearly lagging when it comes to adoption. The count of daily active users of ByteDance\u2019s Doubao and Alibaba\u2019s Qwen models reached 78.7 million and 73.5 million respectively as of Wednesday, far exceeding Yuanbao\u2019s 18.3 million, according to the Shanghai Securities Journal, which cited data from QuestMobile.<\/p>\n The underperformance in 2026 comes after Tencent\u2019s shares more than doubled in the previous two years, outstripping both Alibaba and Baidu over that period. The stock rallied nearly 44% last year on the back of robust earnings supported by a booming gaming business, as well as broader optimism toward the tech sector.<\/p>\n \n \n ADVERTISEMENT<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
\u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \n \n ADVERTISEMENT:<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n \u00a0<\/p>\n Not everyone is bearish though. Analysts at Goldman Sachs Group said earlier this month that Tencent, along with Alibaba, continues to be the best positioned mega-cap stock on a one-to-three-year horizon within China\u2019s internet space.<\/p>\n \u201cTencent could catch up if they execute well,\u201d said Jian Shi Cortesi, a fund manager at GAM Investment Management in Zurich. \u201cIt\u2019s huge and captive user base gives it an advantage to quickly gain a foothold in AI-related services.\u201d<\/p>\n Meanwhile, pressure in the AI race is mounting amid a flurry of product launches ahead of the holidays.<\/p>\n Zhipu on Thursday released the latest iteration of its large language model, GLM-5, surpassing a rival offering from Moonshot AI unveiled just weeks ago. ByteDance has also won high praise for the performance of its new video model, Seedance 2.0, which is still in testing.<\/p>\n Zhipu\u2019s shares soared 29% in Hong Kong on Thursday. The company also hiked the price of its GLM Coding Plan \u2014 similar to Anthropic PBC\u2019s Claude Code, which is unavailable in China \u2014 by 30% this week to capitalise on surging demand.<\/p>\n Tencent\u2019s stock, meanwhile, slid 2.3% to close at its lowest since August.<\/p>\n \u201cThe market probably just feels that the company isn\u2019t being very aggressive in its AI transformation,\u201d Julia Pan, an analyst at UOB Kay Hian Holdings , said of Tencent. \u201cWe really need to see some change in the narrative \u2014 for example, how AI gets embedded into different segments, and how AI applications contribute to performance \u2014 for its share price to recover.\u201d<\/p>\n \u00a9 2026 Bloomberg<\/p>\n Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n |
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