Washington's threat to sanction Chinese AI companies over intellectual property theft has weighed on Tencent shares, though CLSA sees the selloff as a buying opportunity.
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CLSA backs Tencent at HKD740 despite US AI scrutiny fears
Washington's threat to sanction Chinese AI companies over intellectual property theft has weighed on Tencent shares, though CLSA sees the selloff as a buying opportunity.
Tencent Holdings (0700.HK) rose 1.5% after dropping the prior session as US Treasury Secretary Scott Bessent threatened sanctions against Chinese AI companies over intellectual property theft. The stock recovered some ground even as Bessent said the US would closely scrutinize open-source AI models from China.
"We've seen a lot of talk about open source models coming and threatening the large language models in the US," Bessent said in a Fox Business interview. "This administration supports open source models, but what we do not support is IP theft. If we see, especially, that overseas models are stealing from our great companies, we have the ability to sanction them."
CLSA reiterated its High Conviction Outperform rating on Tencent with a target price of HK$740, arguing the company's proprietary AI models have moved beyond the distillation techniques drawing US scrutiny. The broker noted Tencent's Hy3 model, with 295 billion parameters, outperforms rival GLM 5.1 at half the model size and cost. Tencent and Alibaba Group (9988.HK) remain core holdings for most global funds, CLSA said, though recent capital rotation into memory and hardware stocks may pressure share prices near term.
The US and China are scheduled to hold their first bilateral AI talks in September, with Bessent expected to lead the US delegation. The discussions come as Chinese President Xi Jinping last week called for open-source AI cooperation, pushing back against what Beijing views as Washington's overextension of national security concerns in the technology sector.
Bessent said watermarks of American large language models had been found on many Chinese AI offerings, adding that the administration would investigate in the coming days or weeks. The comments follow accusations by Anthropic and OpenAI that Chinese AI labs including DeepSeek and Moonshot used unauthorized distillation to copy US capabilities. Hugging Face Chief Executive Clem Delangue has pushed back, saying distillation is common practice globally and that Chinese research teams have produced strong models through open collaboration.
This article is for informational purposes only and does not constitute investment advice.
[1] ＜Research＞CLSA Says TENCENT Hit by Concerns Over US AI Scrutiny, Reiterates High Conviction Outperform Rating[2] US threatens sanctions against Chinese AI companies over alleged intellectual property theft[3] US, China to hold AI talks in September, sources say[4] US Treasury Chief Threatens Sanctions on Chinese AI Labs Over 'IP Theft' Concerns[5] US Treasury Chief Threatens Sanctions on Chinese AI Labs Over ‘IP Theft’ Concerns
