Tencent's Bold Bet on AI: A Challenge to TSMC's (TSM.US) Asian Valuation Crown
1min read Global chip foundry leader tsmc (TSM.US) is facing a market capitalization challenge from Tencent Holdings (00700), a Chinese internet giant, as investors' attention to Tencent's artificial intelligence (AI) layout has soared, narrowing the gap between the two to US$109bn, the smallest since the end of 2023.TSMC's share price has fallen 11% this year, falling in line with global chip stocks such as nvidia, amid concerns about the semiconductor industry's valuation bubble and weak global electronic demand, leading to continuous outflows. In contrast, Tencent's share price has risen about 30% this year, outperforming the Hang Seng Technology Index and narrowing the gap with TSMC's market capitalization.Moreover, Tencent's quarterly revenue growth reached a new high since 2023, and it announced a significant increase in its AI infrastructure investment. Market analysis believes that as the commercialization of generative AI technology accelerates, Tencent's layout in computing resources, algorithm models and other fields is forming a new growth pole.At the same time, the flow of funds data reveals the pressure faced by TSMC: since February 24, global funds have net sold TSMC shares worth about US$5.8bn (NT$190.4bn), and the foreign holding ratio has dropped to 72.7%, the lowest since the end of 2023. In contrast, the Southbound trading funds tracking Tencent have continued to flow in, reflecting investors' expectations for the AI transformation of Chinese tech giants.Although Tencent's share price is still 40% lower than its peak in 2021, its strategic transformation has accelerated significantly compared to most of its Chinese tech peers. If AI technology conversion exceeds expectations, coupled with the recovery of the semiconductor cycle, this cross-border battle for the Asian king of market capitalization may see a dramatic turn.However, whether TSMC can hold its crown depends not only on the pace of its 3nm/2nm advanced process, but also on observing the logic of revaluation of "soft" and "hard" forces under the AI wave.
