Tencent Shares Fall Below HK$400 to One-Year Low, Down Nearly 40% Year-to-Date
nashnova research
Tencent closed down 4.04% at HK$393.8 on October 21, breaking below the HK$400 mark to a one-year low; its market cap has shrunk from HK$5.76 trillion to HK$3.58 trillion year-to-date — a nearly 40% decline driven by massive AI spending squeezing short-term profits.
How much did it lose in one day — and this year?
Tencent (00700) closed at HK$393.8 on October 21, down 4.04% on the day, breaking through the HK$400 level to hit a one-year low.
The stock touched roughly HK$634 earlier this year, valuing the company at about HK$5.76 trillion. By close, market cap had fallen to HK$3.58 trillion — a year-to-date decline of nearly 40%.
The Hang Seng Tech Index fell 1.26% to 3,995, also dropping below 4,000. Tencent's decline outpaced the broader selloff.
How much is AI actually costing?
Q2 capex hit RMB 52.78 billion, up 176% year-on-year and 65% quarter-on-quarter. This means → Tencent is pouring money into AI infrastructure at nearly three times last year's rate.
Q2 free cash flow turned negative at RMB −13.8 billion. Strip out prepayments for computing power, and FCF was RMB 37.6 billion. In plain terms = the cash-flow deficit is almost entirely "paying upfront for AI compute," not the core business losing money.
On October 14, Tencent announced plans to issue US$1.8 billion and RMB 26 billion in notes — a form of corporate debt — with net proceeds of roughly US$1.79 billion and RMB 25.89 billion. The market widely expects the funds to go toward AI infrastructure. This reflects no sign of spending pullback.
Can Q3 profits still hold up?
GF Securities forecasts Q3 revenue at roughly RMB 209.8 billion, up about 9% year-on-year, with adjusted operating profit at about RMB 70 billion — down 4%.
UBS expects revenue growth of 7% and adjusted operating profit of roughly RMB 71 billion, down 2%. Both houses blame the profit squeeze on AI-related operating costs — UBS estimates RMB 16 billion in AI opex for the quarter alone.
Yet UBS also notes that stripping out AI strategic spending, Tencent's organic adjusted operating profit growth would be 13%, with gross margin rising to 57.2%. This means → the core business is not deteriorating; the profit dip is almost entirely "consumed" by AI investment.
Why isn't Hong Kong market liquidity helping?
CICC analyst Liu Gang notes that southbound capital — mainland money buying Hong Kong stocks via Stock Connect — totaled only HK$440 billion in net inflows over the first nine months, far below HK$1.4 trillion for all of 2025.
Allocation to Hong Kong stocks by both Chinese mutual funds and overseas active funds has fallen back to "September 24" trough levels or lower. In plain terms = money from both the mainland and abroad is pulling out of Hong Kong equities, sharply thinning the bid.
Liu also points out that the AI trade has rotated from compute chips and cloud providers in 2025 toward memory-centric plays — and Hong Kong's market lacks hardware names, missing this cycle entirely.
What comes next?
Tencent will report Q3 earnings on November 18, 2026. Whether AI spending begins translating into revenue will be the key test for the market to reassess valuation.
This reflects a market no longer asking "how much is AI costing?" but rather "when does the spending start earning its keep?"
Hong Kong's flagship internet companies trail other large-model players and unlisted firms in AI investment payoff, model development, and revenue conversion — the market lacks an upward catalyst comparable to the post-"DeepSeek moment" rally of 2025.
市场有风险，内容仅供研究参考，不构成投资建议。