Tencent Stock Drops On AI Spending Fears, Buybacks Surge in Response

TLDR

• Tencent has lost about $309 billion in market value since an October peak, with its Hong Kong shares down more than a third.
• The company has been buying back stock almost daily since mid-May, spending over HK$9 billion ($1.1 billion) in June alone, its biggest monthly total this year.
• A shareholder mandate from May 13 allows Tencent to repurchase up to roughly 912 million shares, about 10% of shares outstanding.
• Investors remain cautious over how Tencent will monetize its growing AI spending, which doubled to over 36 billion yuan planned for 2026.
• Tencent’s stock trades at 11.2 times forward earnings, its cheapest valuation on record and below utility firm CLP Holdings.

Tencent is on a buying spree, just not the kind that grabs headlines for new acquisitions. The Shenzhen-based tech giant has been purchasing its own stock almost every trading day since mid-May, as it tries to steady a share price that has taken a serious hit over the past several months.

Tencent Holdings Limited, TCTZF

The numbers tell the story. Tencent’s Hong Kong-listed shares have lost more than a third of their value since hitting a high in October. That decline has erased roughly $309 billion in market value.

June has been the busiest month yet for buybacks. Tencent spent over HK$9 billion, or about $1.1 billion, repurchasing shares this month. That’s set to be the largest monthly buyback total of the year.

On June 15 alone, Tencent bought back approximately 1.081 million shares for HK$5.01 billion, with prices ranging between HK$458 and HK$475.6 per share. Back on May 22, it picked up another 1.132 million shares for HK$500.56 million.

Why Investors Pulled Back

The selloff traces back to concerns over Tencent’s heavy AI spending. In March, the company suffered a single-day market value drop of $66 billion after disclosing its AI investment plans.

Tencent said in March it would more than double AI investment to over 36 billion yuan, around $5.3 billion, for 2026. Investors weren’t convinced the payoff would match the price tag.

Mainland Chinese investors, who historically supported Tencent during past downturns, have instead been net sellers for three straight months through June.

The Buyback Mandate

Tencent’s repurchase program has real teeth behind it. At its annual general meeting on May 13, shareholders approved a mandate allowing the company to buy back up to approximately 912 million shares, close to 10% of total issued shares.

That gives Tencent plenty of room to keep buying if the stock keeps sliding. The company’s market cap has been sitting between roughly $470 billion and $485 billion as of late June.

Even with the buybacks, Tencent’s stock is down 1.8% for the month. That compares with a steeper 10% drop in the broader Hang Seng Tech Index over the same period.

If June closes lower, it would mark Tencent’s fifth straight monthly decline, its longest losing streak since 2018.

Tencent isn’t alone. Citigroup analysts, including Alicia Yap, expect buybacks among Chinese internet companies to pick up pace as firms try to hold onto investors. Meituan’s top executive recently called the food delivery company “severely undervalued” and said it plans its own buybacks.

Meituan and Alibaba shares are both down about 35% this year. As for valuation, Tencent now trades at 11.2 times one-year forward earnings, the cheapest level on record for the company and lower than utility firm CLP Holdings, which trades above 15 times.

This month, Tencent began testing a new AI assistant for WeChat, known as Weixin in China, as it works to keep pace with domestic AI rivals.

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