Daiwa cuts its target price but increases its AI capital expenditure, putting 181 billion on chips after easing restrictions and betting on a cloud boom driven by the “cloud explosion.” For the core gaming business, it’s enough to be stable—just wait for it to come to fruition in the second half of 2026.

Daiwa Securities cut Tencent’s target price to HK$670, lowering EPS for 2026–2028 by 1–6% respectively. It also raised 2026 AI capital expenditures from RMB108 billion to about RMB181 billion, reflecting expectations of improved AI investment and chip supply. Despite higher depreciation weighing on near- and mid-term profits, the cloud business is expected to accelerate from the second half of 2026 as AI demand materializes; game revenue growth is set to slow on a high base, but market share still remains strong.