Tencent (00700) is betting big on AI! Challenge TSM.US (TSM.US) to the Asian Market Capitalization Throne

The Zhitong Finance App learned that TSM.US (TSM.US), the world's leading chip foundry, is facing a market capitalization challenge from Chinese internet giant Tencent Holdings (00700). As investors' attention to Tencent's artificial intelligence layout soared, the market capitalization gap between the two sides narrowed to 109 billion US dollars, the smallest difference since the end of 2023.

According to information, since this year, TSMC's stock price has fallen by a total of 11%, falling into adjustment along with global chip stocks such as Nvidia. The market is concerned that there is a valuation bubble in the semiconductor industry, compounded by weak global demand for electronics, leading to continued capital outflows. Looking at Tencent Holdings, the stock price bucked the trend and rose by about 30% during the year, not only outperforming the Hang Seng Technology Index, but also drastically narrowing the market capitalization gap with TSMC from the end of 2023.

Furthermore, according to financial reports released this week, Tencent's quarterly revenue growth rate hit a new high since 2023, and it was announced that it will significantly increase investment in artificial intelligence infrastructure. Market analysts believe that with the acceleration of commercialization of generative AI technology, Tencent's layout in the fields of computing power resources and algorithm models is forming a new growth pole.

Meanwhile, capital flow data revealed the pressure faced by SMC: since February 24, global funds have net sold TSMC shares worth about US$5.8 billion (equivalent to NT$190.4 billion), and the foreign shareholding ratio fell to 72.7%, the lowest level since the end of 2023. In contrast, tracking Tencent's continued inflow of Hong Kong Stock Connect capital reflects investors' expectations for the Chinese tech giant's AI transformation.

Although Tencent's stock price is still 40% below its peak in 2021, the pace of its strategic transformation is already significantly faster than most of its Chinese tech peers. If the transformation of AI technology exceeds expectations and the semiconductor cycle recovers, this battle for the Asian market capitalization throne spanning hardware and software may take a dramatic turn.

However, whether TSMC can hold the crown depends not only on how fast the 3nm/2nm advanced manufacturing process progresses, but also on the valuation restructuring logic of “soft” and “hard” forces under the AI wave.