Tencent Holdings Ltd. shares dropped 7.1 percent on July 22, marking their steepest single-day decline since April 2025. The selloff extended a roughly 30 percent year-to-date loss as investor patience with its artificial intelligence investments eroded.
The pressure spread across the broader Chinese gaming sector. NetEase and XD Inc. both fell more than 6 percent on July 22, pulling the Hang Seng Tech Index down 3.5 percent, reflecting a rotation away from companies without near-term AI-driven revenue.
Investor concerns centered on slowing mobile gaming revenue. First-quarter results released in May showed revenue of 196.5 billion yuan, missing analysts' forecasts of 198.96 billion yuan. Net profit of 58.1 billion yuan also fell short of expectations.
Domestic games revenue rose 6 percent year-over-year to 45.4 billion yuan in the first quarter, while international games revenue increased 13 percent to 18.8 billion yuan. Tencent attributed part of the domestic shortfall to the later timing of the Spring Festival in 2026.
The market read the first-quarter results as a slowdown in a segment investors typically value most. Tencent shares are down approximately one-third from their October 2025 high, erasing about $309 billion in market capitalization through late June.
Tencent spent 18 billion yuan on new AI products in 2025. President Martin Lau Chi-ping said the company plans to at least double that figure in 2026, directing capital toward models, agents and products integrated with its WeChat consumer ecosystem.
The market, however, continues to value Tencent primarily as a gaming and advertising company. Investor scrutiny of AI outlays has intensified given the absence of clear financial returns.
During this period of skepticism, Tencent's AI-native office agent WorkBuddy unexpectedly topped China's desktop software rankings in June, according to a third-party report, adding a new data point to the debate over Tencent's AI progress.
Industry insiders believe desktop office assistants like WorkBuddy could achieve adoption comparable to standard office software, a market with recurring, high-margin revenue potential.
CEO Ma Huateng said in the first-quarter release that the company achieved early progress on new AI products, including Hy3 and productivity agents. Improved AI-driven ad recommendation models inside WeChat offer a more immediate benefit to an existing revenue stream.
WorkBuddy's traction, alongside those developments, gives Tencent a concrete rebuttal to market skepticism—and a potential path to demonstrating returns on its AI capital expenditure.
