Tencent: Shares Look Cheap as Meta’s AI Agent Success Boosts the Bull Case

Key Morningstar Metrics for Tencent Holdings

• Fair Value Estimate
  : HKD 780
• Morningstar Rating
  : ★★★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : High

Tencent 00700 shares rose as much as 7% intraday on Sept. 22 after Meta’s artificial intelligence agent app, Muse, topped the US App Store and helped lift Meta META shares 11%. Investors viewed Muse’s traction as a positive read-through for Tencent, which is testing a similar AI agent, Xiaowei, inside WeChat.

Why it matters: Muse’s success doesn’t change our Tencent forecasts, but it challenges the market’s assumption that Tencent’s AI agent business has little or negative economic value, a view that has contributed to Tencent shares falling almost 30% this year.

• Xiaowei isn’t in our fair value estimate yet. As we laid out in our Sept. 2 note, Xiaowei remains in pilot testing. But it has a structural advantage over Muse: Xiaowei sits inside WeChat, China’s most-used app, while Muse is a stand-alone download.
• We see three potential monetization paths: 1) a cut of agent-facilitated transactions; 2) higher ad revenue from better targeting, supported by richer user-intent signals gathered by Xiaowei; and 3) a paid subscription tier for users of advanced AI features. None of this is in our valuation today.

The bottom line: We maintain our HKD 780 fair value estimate for wide-moat Tencent. Muse reaching number one on the US iOS App Store is an encouraging signal of consumer demand for AI agents, although willingness to pay remains unproven.

• We view Tencent shares as very undervalued, at roughly a 40% discount to our estimate and 14 times 2026 earnings. A successful AI agent launch, likely later this year, could be a catalyst for the shares.
• Another unmodeled option is WorkBuddy, a workplace AI assistant comparable to Claude or Codex that lets users route tasks across multiple models. Evidence of relatively inelastic AI inference pricing in China adds confidence in its long-term monetization potential.