Tencent's Market Cap Drops Below 5 Trillion Hong Kong Dollars, Market Concerned About Share Buyback "Shrinkage"

Increase AI investment and reduce share repurchase amounts.

On March 19, after releasing its 2025 performance forecast, Tencent Holdings (00700.HK) initially dropped over 6% in the morning session, closing down 5.9% at HKD 518, with a turnover of HKD 19.1 billion. Its total market value fell below HKD 5 trillion.

Industry insiders believe Tencent’s performance met expectations, but investors are concerned that increased artificial intelligence (AI) investment has led to a reduction in share repurchase amounts. The stock is expected to test the important support level of HKD 500 in the short term, while the company’s medium- to long-term growth potential remains uncertain.

At the earnings release on the evening of March 18, Tencent President Martin Lau said that last year, Tencent invested 18 billion yuan in developing new AI products, and this year’s investment will at least double. The additional profits generated by Tencent’s solid core business can support increased investment in AI. Lau stated that if Tencent has sufficient resources to support AI development, capital expenditure could meet the company’s expectations, and share repurchases might be appropriately reduced.

Wutong Research analyst Cen Zhiyong analyzed that Tencent’s management is prioritizing AI investment before considering further share buybacks. Investing in AI is a major trend that relates to future growth potential. Tencent’s strategy of allocating funds to future growth areas is the right choice. However, in the short term, investor focus may be on share repurchases. With reduced buyback amounts, the stock price is likely to face pressure. In the short term, HKD 500 serves as a support level, while long-term prospects depend on future growth potential.

Pan Jun, investment manager at Cheese Fund, noted that Tencent’s sharp decline after the earnings release is partly due to senior management announcing a reduction in buybacks, weakening the previously highly certain stock support. For investors holding Tencent as a utility-like or high-dividend stock, this is a negative signal. Additionally, AI investment involves heavy capital expenditure, raising market concerns about potential profit margin dilution. In the context of aggressive AI investments by competitors like ByteDance, Alibaba, and Baidu, Tencent maintaining high buybacks while neglecting infrastructure upgrades could put it at a disadvantage in next-generation social and gaming competitions.

Blue Water Capital Management Limited Chief Investment Officer Li Zeming said that Tencent’s capital expenditure plan for AI in 2026 still lacks clear guidance, and the current capital market remains skeptical about AI giants’ investments in the tech sector. Previously, the market believed such investments could yield returns, but when calculating the relationship between current computing infrastructure costs and expected returns, the two are not proportional. In the short term, increasing AI capital expenditure is not seen as a positive signal for the capital markets.

Disclosures show that in 2025, Tencent will repurchase 153 million shares for a total of HKD 80 billion, and in 2024, it repurchased 307 million shares for HKD 112 billion.

According to disclosures, in 2025, Tencent’s annual revenue was HKD 751.766 billion, up 14% year-over-year, with a net profit of HKD 224.842 billion, up 16% year-over-year.

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Editor: Jiang Yuhan