U.S. Labels Tencent as Military-Linked

Pentagon Listing Impacts Tencent's Stock Value

Tencent, a major Chinese technology firm, has been added to the Pentagon's list of companies with ties to the Chinese military (PLA). This designation stems from a 2020 executive order by President Trump restricting US investment in Chinese military entities. The list, maintained by the US Department of Defense, identifies companies believed to contribute to PLA modernization through technology, expertise, or research. The inclusion of Tencent, announced on January 7th, caused an immediate 6% drop in its stock price.

Tencent's Response and Potential Actions

Tencent swiftly denied being a military company or supplier, stating that the listing has no operational impact. However, the company pledged to collaborate with the Department of Defense to clarify any misunderstandings. This proactive approach mirrors the actions of other companies who have successfully had their names removed from the list after working with the DOD.

Financial Implications and Tencent's Global Reach

The listing's impact on Tencent's stock is significant, given its global prominence. As the world's largest video game company by investment, and a global tech giant, a potential reduction in US investment could have substantial financial consequences. Tencent's gaming division, Tencent Games, operates through a publishing arm and holds stakes in numerous prominent studios, including Epic Games, Riot Games, Techland, Don’t Nod, Remedy Entertainment, and FromSoftware. Its portfolio also includes investments in companies like Discord. The company's substantial market capitalization, dwarfing that of competitors like Sony, underscores the magnitude of this situation.