Tencent Branded a Chinese Military Company by US Government

Pentagon List Includes Tencent, Causing Stock Dip; Company Disputes Designation

Tencent, a Chinese technology giant, has been added to the U.S. Department of Defense's (DOD) list of companies with ties to the Chinese military, specifically the People's Liberation Army (PLA). This inclusion stems from a 2020 executive order by former President Trump restricting U.S. investment in Chinese military entities. The order mandates divestment from these companies, which are believed to contribute to PLA modernization through technology, expertise, and research.

The DOD's updated list, released January 7th, prompted an immediate response from Tencent. A spokesperson issued a statement to Bloomberg, asserting that Tencent is "not a military company or supplier" and that the listing has no operational impact. However, the company pledged to collaborate with the DOD to clarify any misunderstandings.

This designation has had a noticeable impact on Tencent's stock price. Shares experienced a 6% drop on January 6th, and a continued downward trend is observed, suggesting a direct correlation with the DOD listing. Given Tencent's global prominence—it's the world's largest video game company by investment and a major player overall—this inclusion and potential removal from U.S. investment portfolios carries significant financial implications.

Tencent's gaming division, Tencent Games, operates as a publisher and investor. Its portfolio includes substantial stakes in prominent studios such as Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware. Furthermore, Tencent Games has invested in numerous other developers and related companies, including Discord. This extensive network underscores the potential ripple effects of its inclusion on the DOD's list. The company's market capitalization significantly surpasses that of its nearest competitor, Sony, highlighting the magnitude of this situation. Past precedents show that companies have successfully had their names removed from the list after working with the DOD, suggesting a potential path forward for Tencent.