By Song Jianan, Financial Reporter
On June 2, Tencent Holdings (00700.HK) absolutely stole the show, closing the day up a massive 10.46% to land at 481.6 HKD. That marks its strongest single-day rally since January 2021. The company’s market cap rocketed to 4.39 trillion HKD, firmly cementing its crown as one of Hong Kong’s undisputed market veterans.
It wasn’t just Tencent riding the wave. The entire Hong Kong tech sector was buzzing with excitement, pushing the Hang Seng Tech Index up 4.72% to 5,199.28 points on noticeably heavier trading volumes. Heavyweights like Meituan jumped over 9%, while Alibaba and JD.com both climbed past 6%. Interestingly, though, the AI model heavyweights took a breather, with MiniMax slipping more than 5% and Zhipu AI down over 3%.
So, why the sudden rush into tech stocks? Part of it boils down to shifting market styles on the mainland, which naturally boosted risk appetite for Hong Kong-listed shares. But the bigger driver is clearly the growing belief that AI is finally moving from hype to hard cash. Investors are actively backing internet giants that actually have the ecosystems and execution power to turn AI into real-world products.
Dongwu Securities is pretty bullish on what’s next, noting that the catalysts for a Hong Kong market uptrend are steadily stacking up. Right now, we’re seeing a perfect storm of external tech momentum syncing with internal valuation recovery. The global tech rally is gradually shifting from AI hardware toward software and downstream applications. Historically, Hong Kong lagged behind US, Korean, and Japanese markets mainly because it lacked heavyweights in AI hardware. But if the US tech rally keeps flowing into applications and infrastructure, Hong Kong’s heavier weighting in AI software and related services could become a massive catalyst for its next leg up.
Let’s not forget how rough the ride has been. Before this breakout, Tencent spent a grueling eight months in the dumps. After peaking at 677.7 HKD back in October 2025, the stock bled through multiple correction cycles, finally bottoming out at 420.4 HKD on May 28, 2026. That’s a brutal drawdown of nearly 38% at its worst.
Through May, the stock basically flatlined between 420 and 470 HKD. Any attempts at a rebound fizzled out quickly, trading volume kept drying up, and you could practically cut the risk-off sentiment with a knife.
Valuation-wise, the setup looked ripe for a rebound. Tencent was trading at a trailing P/E of just 14.6x to 15x, hovering near multi-year lows. But cheap doesn’t always mean buyers show up. Investors were still split over how fast Tencent’s AI initiatives would actually hit the market and whether long-term growth could hold steady, which kept fresh capital on the sidelines.
Things got shaky back in March when Tencent President Martin Lau hinted at a shift in priorities during an earnings call. He explained that GPU supply bottlenecks kept capital spending below target last year, but if conditions improve this year, they plan to ramp up spending. Crucially, AI and model investments are set to at least double, which might mean dialing back share buybacks slightly. The market didn’t take kindly to that news initially, sending the stock tumbling over 6% and briefly wiping out the 5 trillion HKD market cap mark.
According to the latest financials, Tencent dropped 79.2 billion RMB on capital expenditures last year (covering everything from IT infrastructure and data centers to land rights and IP), with a hefty 19.6 billion RMB poured in during Q4 alone—mostly for AI infrastructure. Lau also noted that the company allocated 18 billion RMB specifically to new AI product development in 2025.
The real game-changer landed on May 13. That’s when shareholders gave the green light to a fresh buyback mandate, authorizing the repurchase of up to 912 million shares—roughly 10% of the company’s outstanding stock (excluding treasury shares) at the time.
And they didn’t just talk the talk. From May 18 through June 1, Tencent hit the market for 10 straight trading days, snapping up 11.334 million shares for a total of 5.008 billion HKD. That averages out to a rock-steady 500 million HKD per day. On June 1 alone, they bought back 1.148 million shares between 430.4 and 441.8 HKD for 501 million HKD. Just a few days earlier on May 28, they picked up another 1.179 million shares in the 420.4–431.2 HKD range, dropping another 500 million HKD into the market.
Year-to-date, that adds up to 28 separate buyback rounds, burning through 15.165 billion HKD to retire a total of 29.145 million shares. Beyond just shrinking the share count to boost EPS, this steady stream of buying has quietly put a floor under the stock when market sentiment was at its weakest.
Looking ahead, Goldman Sachs isn’t backing down. In a recent research note, they’re keeping their “Buy” rating intact with a 700 HKD price target. Even with full-year profit growth expected to cool off slightly, they still forecast adjusted operating profits to climb 10% in Q1 and 8% for the full year.
Goldman also highlighted a major leap forward with Tencent’s Hunyuan 3.0 model. By completely overhauling its foundational AI strategy, the company has built a model that now stands toe-to-toe with the best in China. They’ve rebuilt their large language model team from the ground up, revamped their pre-training and reinforcement learning stacks, and cleaned up their training datasets. More importantly, they’re shifting how they measure success—moving away from standard public benchmarks and focusing on true general intelligence. Right now, Hunyuan 3.0 (or Hy3) is shaping up to be one of the strongest in its weight class, laying solid groundwork for even bigger, smarter iterations expected to roll out over the next six to nine months.
