Tencent’s gaming stakes draw US national security scrutiny

The Chinese technology giant, which is the world’s largest gaming company, owns Los Angeles-based Riot and has a 40% stake in Maryland-based Epic

Tencent’s year-on-year profit grew by 37 per cent in the second quarter as new subscribers to its music and video-streaming services helped boost revenue. Reuters
Powered by automated translation

The US administration has asked gaming companies to provide information about their data-security protocols involving Chinese technology giant Tencent, people familiar with the matter said.

The Committee on Foreign Investment in the US, which is chaired by the Treasury Department, has sent letters to companies, including Epic Games, Riot Games and others, to inquire about their security protocols in handling Americans’ personal data, said the people, who asked not to be named because the discussions are private.

Tencent, the world’s largest gaming company, owns Los Angeles-based Riot and has a 40 per cent stake in Maryland-based Epic, which is the maker of the popular video game Fortnite.

Representatives for the companies declined to comment or did not immediately respond. The Treasury Department declined to comment.

The inquiry builds on the US administration’s heightened scrutiny of Chinese companies and their ties to US firms - a source of fresh tension with the Beijing government and a pillar of President Donald Trump’s re-election campaign. Tencent’s shares sank as much as 2.8 per cent in Hong Kong on Friday, trimming their gains for the year to roughly 36 per cent.

Mr Trump already has ByteDance, owner of the TikTok video app, in his sights and is cracking down on Tencent’s WeChat app.

Tencent has more than 300 investments in its portfolio, according to PC Gamer. That makes it the force behind many of the world’s most popular games.

In 2011, Tencent paid $400 million (Dh1.5 billion) for a 93 per cent stake in Riot Games, the studio behind League of Legends, the number one game on PCs. Four years later, it scooped up the rest.

Tencent’s US gaming investments, including Riot Games, Epic Games and Activision Blizzard may be at risk of forced divestment similar to ByteDance’s TikTok with the Committee on Foreign Investment in the US launching an inquiry on national security grounds.

Bloomberg estimate Tencent’s US assets could be worth at least $22bn billion, and account for up to 7 per cent of its sales and profits.