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Tencent may be the latest casualty in the ongoing tech cold war between the United States and China. While there are no immediate repercussions to being placed on the “entity list,” the escalating tensions between the two countries could lead U.S.-based companies to exercise caution when engaging in business with Tencent and other listed entities.
The compilation of companies associated with the Chinese military was established in accordance with the Thornberry Authorization Act, which stemmed from an executive order issued by then-President Trump in late 2020, barring U.S. entities from investing in such companies. In response to its inclusion on the list, Tencent has asserted that it is neither a military entity nor a supplier. The company emphasized that the listing does not impact its business operations, characterizing the designation as a “clear mistake.” Tencent has expressed its intention to collaborate with the Department of Defense to be removed from the entity list.
Looking ahead, the market response to Tencent’s placement on the entity list has underscored the heightened risks faced by Chinese tech firms. Despite the challenges posed by China’s slowing domestic economy, these companies also confront obstacles as the U.S. government intensifies restrictions on chip and high-tech exports, as well as implements measures to impede technological innovation in China.
Citigroup has viewed the decline in Tencent’s stock price as an opportune moment for investment. Although the tech giant maintains a dominant position in China, its growth rate has decelerated since the onset of the pandemic. Given the persistent economic uncertainties in China, exercising caution with regards to Tencent’s stock performance appears prudent.
For investors seeking to capitalize on potential lucrative opportunities, seizing a second chance should not be overlooked. The expert team at our organization occasionally issues a “Double Down” stock recommendation for companies believed to be on the brink of a significant upturn. If there is a concern about having missed the window for investment, the present moment may present an optimal opportunity to acquire shares before it is too late. Notable instances include:
– Nvidia: an investment of $1,000 following our “Double Down” recommendation in 2009 could have yielded $374,613.
– Apple: a $1,000 investment subsequent to our “Double Down” advice in 2008 could have resulted in $46,088.
– Netflix: a $1,000 investment post our 2004 “Double Down” recommendation could have grown to $475,143.
Currently, “Double Down” alerts are being issued for three exceptional companies, with the potential for such opportunities to be scarce in the near future.
Citigroup serves as an advertising partner of Motley Fool Money. Jeremy Bowman does not hold positions in any of the mentioned stocks. The Motley Fool endorses and holds positions in Tencent, abiding by a disclosure policy.
