Executive Overview
Tencent Holdings (00700.HK) shares fell despite meeting performance expectations, as investors reacted to management’s plan to significantly ramp up AI investment—at least double 2024 levels—which could reduce share buybacks. Analysts note that while this strategy supports Tencent’s long-term growth in AI and emerging technologies, it removes a key short-term support previously provided by buybacks, with HK$500 cited as an important support level.
On March 19, following the release of its 2025 results, Tencent Holdings (00700.HK) saw its stock fall 6.8%, closing at HK$513, which pushed its total market value below HK$5 trillion to HK$4.67 trillion.
Industry insiders believe that Tencent’s 2025 performance met expectations, but investors are concerned that the company’s increased investment in artificial intelligence (AI) may reduce the amount allocated for stock buybacks. They expect that in the short term, the stock will test the important support level of HK$500, while the company’s medium- to long-term growth potential remains uncertain.
At the earnings conference on March 18, Tencent President Liu Zhiping said that the company invested RMB 18 billion last year in developing new AI products, and this year the investment is expected to at least double, adding that the additional profits from Tencent’s stable core business can support this increased spending. He also mentioned that if Tencent has sufficient resources to fund AI development, capital expenditures could reach the company’s planned levels, potentially resulting in a reduction of share buybacks.
Cen Zhiyong, an analyst at Planetree Research, noted that Tencent’s management is prioritizing AI investment over share buybacks. “While investing in AI is an essential trend tied to the company’s future growth potential, the short-term focus for investors remains on buybacks. With reduced repurchases, the stock is likely to face downward pressure, with HK$500 serving as a key short-term support level, while long-term performance will hinge on Tencent’s ability to capitalize on growth opportunities.”
Pan Jun, investment manager at Cheese Fund, said Tencent’s sharp stock decline following its results is partly due to the announcement of reduced buybacks, which removes a previously reliable support for the stock and is negative for investors who treat Tencent as a quasi-utility or high-dividend play.
“In addition, AI investment is highly capital-intensive, raising market concerns that it could dilute Tencent’s strong profit margins. In a landscape where competitors like ByteDance, Alibaba, and Baidu are aggressively investing in AI, failing to upgrade infrastructure while maintaining high buybacks could leave Tencent at a disadvantage in the next generation of social media and gaming,” said Pan.
Li Zeming, Chief Investment Officer at Blue Water Capital Management Limited, noted that Tencent’s 2026 AI capital expenditure still lacks clear guidance. The capital markets remain highly uncertain about the returns from large-scale AI investments in the tech sector. While such investments were previously seen as potentially profitable, the current costs of computing infrastructure far outweigh the expected returns. In the short term, the market views increased AI spending as a negative factor.
Disclosures show that in 2025, Tencent repurchased 153 million shares for a total of HK$80 billion, compared with 307 million shares repurchased for HK$112 billion in 2024. The company reported annual revenue of ¥751.77 billion in 2025, up 14% year-on-year, and net profit of ¥224.84 billion, up 16% year-on-year.