China’s Tencent To Pour $70B Into ‘New Infrastructure’ Including AI


China’s Tencent Holdings (TCEHY), the world’s largest online gaming company, has revealed that it will invest 500 billion yuan ($70 billion) in technology infrastructure over the next five years.

The investment will focus on cloud computing, artificial intelligence and cybersecurity, as well as blockchain, servers, big data centers, supercomputer centers, internet of things operating systems, 5G networks and quantum computing.

It is also in line with China’s ‘new infrastructure’ strategy, with China hoping that heavy tech spending on areas such as 5G will revive its flailing economy. Due to the coronavirus pandemic, the country’s first quarter GDP contracted by 6.8%- the first contraction in decades.

“Expediting the ‘new infrastructure’ strategy will help further cement virus containment success,” Guangming Daily quoted Dowson Tong, senior executive vice president of Tencent, as saying.

Indeed, Alibaba (BABA) also recently announced that said it will invest 200 billion yuan ($28 billion) to develop its cloud infrastructure over the coming three years.

“The Covid-19 pandemic has posed additional stress on the overall economy across sectors, but it also steers us to put more focus on the digital economy,” Jeff Zhang, President of Alibaba Cloud Intelligence, said at the time.

Notably all six analysts covering Tencent stock are bullish on its prospects, giving it a firm Strong Buy consensus. Meanwhile the $61 average analyst price target indicates 15% upside potential from current levels, with shares up 10% year-to-date. (See TCEHY stock analysis on TipRanks).

“We continue to be confident in Tencent’s mobile game business as people spend more time playing games during COVID-19” writes Oppenheimer analyst Jason Helfstein. Specifically, Peacekeeper Elite surpassed HoK in February for the first time, says the analyst, and became the No. 1 grossing mobile game in China, indicating the game’s strong performance.

“We still consider Tencent one of the best plays under COVID-19 uncertainties” he concluded, while ramping up his price target from $56 to $58.

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