Tencent Holdings Limited (OTC:TCEHY) posted impressive third quarter results last week.  The world's largest video game company and operator of the WeChat messaging platform showed that the gaming segment rebounded from China’s tech regulatory crackdown, along with shining advertising sales. Earlier this month, Tencent revealed it made a deal with Meta Platforms (NASDAQ:META) to sell its VR headsets. This move will allow Meta to return to China and face Apple Inc (NASDAQ:AAPL) whose new mixed-reality headset Vision Pro should go on sale early next year.

As Wall Street reported earlier in the month, Meta signed a deal with Tencent to sell a new low-cost version of its virtual-reality (VR) headset in China as of late next year. This move marks Meta's return to a market where its platforms Facebook and Instagram are blocked. Besides returning to China after 14 years, Meta gets to compete with TikTok-owner Bytedance, which makes the VR headset Pico. Wall Street Jounral reported that Meta is planning to use lenses in the headset that are cheaper than those in the Quest 3 for the Chinese market.

Last week, Tencent-owned Tencent Music reported steady growth in paid subscriptions on its platforms which helped offset the impact of Beijing’s ongoing crackdown on online gambling. Although Tencent Music explicitly prohibit online gambling, regulators started targeting its game-like features such as virtual lucky draws earlier this year due to the possibility of them being abused by malicious users for gambling purposes. In response, Tencent Music removed these features, causing a 48.8%drop in services revenue during the reported quarter after already posting a 24% revenue drop for its social entertainment services in the previous quarter. For the quarter ended in September, total revenue dropped 10.8% to 6.57 billion yuan ($901 million) but still topped LSEG’s estimate of 6.31 billion yuan.

2022 was one of the toughest years for gaming companies in China that led to an eight month-long freeze in licences for new games and more restrictions on playing time for minors. But the industry rebounded this year as regulators resumed granting licenses and Tencent came back. Although the new U.S. chip export curbs threaten its GenAI model development, Tencent stated it has accumulated a large supply of Nvidia (NASDAQ:NVDA) chips to fuel its short-term AI model development while it seeks domestic suppliers. Tencent was among the first to order the H800 from Nvidia which allowed it to build a good inventory. Although it was not specified when the purchase took place, Nvidia revealed in October that the H800 is on the US export curb product list through a regulatory filing. But in late October, Nvidia disclosed that the announced restrictions took effect immediately which was weeks earlier than expected.