Citi Identifies TENCENT as Top Beneficiary of China's Approval for H200 Chip Acquisitions

The analyst rating from Citi Research for TENCENT (00700.HK) is based on several key factors: 1. AI Strategy and Restructuring: The company has recently accelerated its AI team restructuring and model updates, which is expected to be a focal point during the upcoming earnings release conference. This indicates a proactive approach to enhancing its AI capabilities, particularly within the WeChat ecosystem. 2. Market Performance: TENCENT's share price has declined by 0.25% year-to-date, which is seen as underperforming the market. This decline is viewed by the broker as a better buying opportunity, suggesting that the current price may not reflect the company's potential for growth. 3. Earnings Expectations: The upcoming 4Q25 results are anticipated to show solid performance, driven by resilient growth in gaming, stable advertising revenue, and strong growth in the overseas cloud business. These factors are expected to partially offset weaknesses in the fintech sector. 4. Investment in AI: The company's increased investment in AI talent and capital expenditure is expected to narrow the gap between revenue growth and gross/operating profit growth in the upcoming quarter. Based on these insights, Citi Research has reiterated a "Buy" rating and raised the target price to $783, while also placing the stock on a 90-day positive catalyst watch.