Tencent

Tencent shares fall after Q2 results as investors worry about sharply increased AI spending that burdens cash flow and return expectations. Mizuho cut the price target from HK$610 to HK$560 and reduced valuation multiples, but kept the rating at neutral. Despite robust advertising and cloud growth and progress on its own AI models, record capex of RMB 52.8 billion and negative free cash flows weigh on the valuation and raise questions about monetizing the AI investments. » More on de.investing.com

Chipmaker Changxin Technology (CXMT) rose after its IPO to become China’s most valuable publicly listed firm, reaching a market capitalization of about €455 billion and surpassing Tencent. Tencent remains far ahead in revenue (first half: 401 billion yuan versus CXMT’s forecast of 110–120 billion yuan). CXMT’s high valuation is based on expectations of AI-driven demand for DRAM memory, supply shortages and rising prices; CXMT is China’s largest maker of such chips and ranks fourth worldwide by capacity. State funds are among the major shareholders, which aligns with Beijing’s goal of strengthening domestic semiconductor production. » More on de.investing.com

Tencent reported a Q2 profit attributable to shareholders of 56.0 billion RMB, about 4% below consensus, while revenue grew 11% to 204.8 billion RMB. Capital expenditures jumped from 31.9 to 52.8 billion RMB due to increased computing capacity and AI initiatives, turning free cash flow negative. Investors worry that high AI costs will weigh on profitability and cash flow in the short term, although core areas such as marketing services, games and FinTech continue to grow. Tencent emphasizes continued investments in AI infrastructure as well as dividend payments and share buybacks despite the more intensive investment cycle. » More on de.investing.com