Internet and gaming giant Tencent (TCTZF) rallied to a three-year high as news of it carrying out testing with DeepSeek fueled optimism among investors, while profit-taking hit shares of Baidu (BIDU) as it announced a similar move to integrate the AI model.
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Shares of Tencent in Hong Kong (HK:0700) rose to their best since July 2021 as the company’s Weixin messaging app began beta testing integration with Deepseek artificial intelligence model. Shares of Tencent, which owns a variety of e-commerce, gaming, music and social media platforms, are up about 70% in the last year.
Over the weekend Tencent said it was testing access to DeepSeek’s AI model for searches in Weixin, in addition to its own Hunyuan model, enabling some users to click on “AI Search” on the search bar within the app.
At the same time Baidu (BIDU) said that it will fully integrate its search engine with DeepSeek’s R1 model alongside its own Ernie chatbot. However shares of Hong Kong-listed Baidu (HK:9888) slipped about 7% ahead of its earnings report due on Tuesday.
Optimism On Chinese AI
The rally for Tencent stock comes as there is increasing optimism about the impact of AI in China in the wake of DeepSeek’s latest models, with Hong Kong’s tech sector entering a bull market. The Hang Seng Tech index, which tracks the 30 largest tech stocks listed in Hong Kong, is up about 25% since its January 13th low.
In a note published Sunday Goldman Sachs (GS) said recent developments have “demonstrated Chinese companies’ ability to continuously improve performance while reducing training/inference costs and computing power requirements, paving the way for speedier AI adoption in China.”
After incorporating a faster adoption timeline, analysts at the Wall Street bank estimate that AI now have a bigger upside lift to growth than before. They say that DeepSeek is a “credible global competitor to U.S.-based AI leaders.”
The launch of homegrown models also highlights ongoing investment in China’s AI capabilities. Based on public company spending data and scaling up tothe broader economy, GS now estimates that AI-related spending is likely to rise sharply in 2025-27, boosting the level of GDP by almost 1% by the end of this decade.
“This boost reflects an initial surge from tech company capex that gives way to spending on end-user AI services by non-tech companies as AI is increasingly incorporated into regular production,” the GS analysts wrote.
The optimism was underscored by a meeting on Monday between President Xi Jinping and Alibaba (BABA) founder Jack Ma.
Is Tencent Stock a Good Buy?
Overall, Wall Street has a Strong Buy consensus rating on TCTZF. The average TCTZF price target of $68.69 implies about 11% upside. Tencent also trades under $TCEHY.
