UBS has released a research report indicating recent discussions with TENCENT's management primarily centered on AI development, including agent-based AI and monetization models. The report states TENCENT is well-positioned to capture long-term growth opportunities in this area. With TENCENT currently trading at a forward price-to-earnings ratio of 14 times, UBS believes the market is underestimating the strength of its core business and the long-term upside potential of its AI initiatives. The firm reiterated TENCENT as a key and preferred stock, maintaining a "Buy" rating and a target price of HKD 780.

According to the report, management indicated that AI is evolving from communication and reasoning towards more action-oriented applications, which increasingly plays to TENCENT's strengths. These strengths include WeChat and QQ serving as natural interfaces between humans and AI, cross-platform capabilities, and expertise in end-user products and security software. Management identified three current bottlenecks for WeChat AI agents: limited model capabilities, data privacy and security concerns, and economic model challenges, specifically high inference costs coupled with difficulties in subscription-based monetization.

The Hunyuan 3.0 model is expected to launch in mid-April and is projected to represent the most significant advancement in the company's model iterations to date. Regarding AI monetization, management adopts a holistic view, positioning the Hunyuan foundation model as an enabling layer to foster broader growth within its ecosystem, rather than focusing on direct monetization of the model itself. As WeChat AI agents are anticipated to increase user engagement within the ecosystem, monetization opportunities are expected to arise from payments, transactions, and advertising revenue.

TENCENT has already achieved a high return on investment through AI applications in its advertising and gaming businesses. In its cloud business, revenue growth accelerated in the fourth quarter of last year, with the unit reportedly achieving an adjusted operating profit of RMB 5 billion for 2025, implying a profit margin of approximately 8% to 10%. With improving chip supply, management plans to gradually shift the business focus towards external cloud customers. For the gaming segment, management views AI as an enabler rather than a disruptor, noting that TENCENT's game portfolio is predominantly composed of multiplayer PvP games, which are harder to displace compared to single-player games.