US Labels Tencent as Military-Influenced

Pentagon List Includes Tencent, Causing Stock Dip; Company Responds

Tencent, a major Chinese technology conglomerate, 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 designation 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 aid PLA modernization through technology, expertise, and research.

The DOD's updated list, released January 7th, included Tencent. Tencent swiftly issued a statement to Bloomberg, asserting that it is "not a military company or supplier" and that the listing doesn't directly impact its operations. However, the company intends to collaborate with the DOD to clarify any misunderstandings.

This inclusion on the list has had a noticeable impact. Tencent's stock experienced a 6% drop on January 6th, with analysts linking this decline to the DOD's designation. Given Tencent's global prominence—it's the world's largest video game company by investment and a major player overall—this listing and the potential for restricted U.S. investment carry significant financial consequences.

Tencent's gaming arm, Tencent Games, operates through a publishing division and holds stakes in numerous successful studios, including Epic Games, Riot Games, Techland (Dying Light), Dontnod Entertainment (Life is Strange), Remedy Entertainment, and FromSoftware. It has also invested in many other notable developers and related companies such as Discord. The company's substantial market capitalization, dwarfing competitors like Sony, underscores the potential ramifications of its inclusion on the DOD's list. Previous instances have shown that companies can work with the DOD to be removed from the list, suggesting a potential path forward for Tencent.