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<Research>M Stanley: TENCENT Ramping up AI Investment; ST Margin Squeezed; TP Cut to HKD650
TENCENT (00700.HK) is ramping up its investment in foundation models, new AI products, and GPUs, Morgan Stanley said in a research report. These upfront investments will exert pres...
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<Research>M Stanley: TENCENT Ramping up AI Investment; ST Margin Squeezed; TP Cut to HKD650
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TENCENT (00700.HK)  -7.400 (-1.490%)    Short selling $1.08B; Ratio 47.391%   is ramping up its investment in foundation models, new AI products, and GPUs, Morgan Stanley said in a research report. These upfront investments will exert pressure on margins in the short term but are expected to entail new opportunities in the long run. The broker reiterated its Overweight rating, lowering the target price from HKD735 to HKD650.

Morgan Stanley forecast a 10.8% YoY revenue growth for 2026, with a 5% YoY growth in non-IFRS operating profit. Key focuses include the Hunyuan 3.0 (to be opened in April) and the application of agent-based AI in WeChat, the desktop intelligent workstation WorkBuddy, and the WeChat office AI assistant Qclaw.

Related News G Sachs: Cloud and Data Centers Top Picks Among China Internet Sub-sectors; Recommends Alibaba (09988.HK) and Kingsoft Cloud (03896.HK)
AI investments will soar in 2026, with Tencent's investment in new AI products whopping RMB18 billion in 2025, and it is expected to more than double in 2026, the broker highlighted. These upfront AI investments may pressure margins in the short term, giving rise to slower profit growth compared to revenue growth in 2026.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-04-02 16:25.)

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