When Alibaba (BABA) failed to report the vulnerability in the open-source logging framework Apache Log4j2, China suspended its partnership. The six-month suspension with Alibaba Cloud Computing will hurt Alibaba’s revenue and damage its branding.
Alibaba’s engineer discovered the Log4j2 vulnerability months ago and reported it. Unfortunately, China found another excuse to punish the e-commerce giant. The suspension may send a signal to Alibaba’s customers to find cloud solutions with another company.
BABA stock fell on Dec. 22 after the news. The next day, Tencent (TCEHY) said it would distribute most of its JD.com (JD) holding to shareholders. The distribution windfall will reward Tencent investors. JD, which is not in the China government’s cross-hair, is a solid firm. The stock fell after the announcement, creating a buying opportunity for investors.
Tencent wants to shrink its holdings in other firms. It will satisfy the government, which is restricting the power that technology firms hold. Investors should consider Tencent stock, too. The firm has a powerful micro-messaging platform, Wechat. It partners with gaming firms worldwide. Its investment in Epic Games in June 2012 continues to pay off.
The gaming market is thriving globally. Tencent is a big investor in this space. Shareholders will fare well by owning shares in this firm and JD.com for e-commerce exposure.