Shares of video game companies tanked on Friday after President Trump’s executive order—targeting not only TikTok-parent company ByteDance but also WeChat-parent company Tencent, which has stakes in a host of U.S. gaming companies—led to confusion over whether that could decimate the video game industry.
The wording of the executive order—specifically the call to ban any transaction with Chinese tech giant Tencent, which owns WeChat—briefly sparked panic that it would hurt the gaming industry.
Tencent holds a 100% stake in Riot Games, the maker of League of Legends, as well as a 40% stake in Epic Games, maker of Fortnite, and a 5% stake in Activision Blizzard, known for its popular Call of Duty franchise.
The Los Angeles Times, among other outlets, pressed the Trump administration about whether the executive order would apply to video game companies owned by Tencent—but the White House confirmed the order will only block transactions related to WeChat and not apply to Tencent’s holdings.
Though the order won’t directly affect Activision Blizzard and other gaming companies, many of their stocks plunged all the same on Friday.
Tencent’s stock, which trades overseas, plunged by around 8% after Trump’s executive order, while Activision Blizzard fell over 5%.
Other video game companies—including those not partially owned by Tencent, such as Electronic Arts, Take-Two Interactive, Zynga and Nvidia, all fell between 2% and 3% on Friday.
What to watch for
Trump’s executive order will go into effect on September 20, although it could well face legal challenges. TikTok, for instance, has already warned that it could go to court and said it is “shocked” by the order.
The Trump administration has ramped up its pressure on Chinese tech companies in recent weeks, calling Chinese-owned apps like TikTok and WeChat “threat[s]” to U.S. national security. TikTok in particular has been the target of U.S. lawmakers for months over allegations that the app’s owners could share U.S. users’ data with the Chinese government, claims that TikTok and parent-company ByteDance have denied. U.S. tech giant Microsoft is now in talks to purchase the operations of TikTok in the U.S., Canada, Australia and New Zealand, a deal that Trump says he would support after initially expressing disapproval. On Sunday, Microsoft said it would “move quickly” to finish a deal with TikTok’s parent company ByteDance “in a matter of weeks.” After initially threatening to ban the social media app, President Trump said in his latest comments that he would give Microsoft the go-ahead to pursue a deal if a “very substantial” portion of the proceeds go to the U.S. Treasury. The move sparked outrage in China, with state media calling it an “open robbery” and “planned smash and grab” of a Chinese technology company.
“Alongside the other fronts of U.S.-China tensions, the growing tech confrontation further troubles the viability of the phase one trade deal,” Evan Rees, Asia Pacific Analyst with Stratfor, a RANE company, recently told Forbes. He warned that the Chinese government could retaliate by directing public ire against U.S. companies operating in China, via “boycotts or other measures.”
The Senate voted unanimously on Thursday to ban TikTok from use on government devices.
TikTok boasts 100 million users in the U.S., while WeChat has been downloaded 19 million times in the U.S., according to Reuters.
TikTok ‘Shocked’ Over Trump’s Executive Order Against The App, Warns It Might Go To Court (Forbes)
Trump Issues Executive Orders Against Chinese Owners Of TikTok And WeChat (Forbes)
Here’s What China Says About TikTok Being Sold To Microsoft, Potential Ban (Forbes)
No, Trump’s Tencent Order Is Not Going To Ban ‘League of Legends’ And ‘Fortnite’ (Forbes)