Shares of Tesla (TSLA - Get Report) gained Tuesday after the huge Chinese Internet and digital media company Tencent  (TCEHY) disclosed it had taken a 5% stake in the electric car maker.

In addition to its advances in electric power, Tesla is a leader in advanced driver assistance technology. Smart car technology is becoming grail for major tech groups in China and Silicon Valley, with companies like ride-sharing company Didi Chuxing and Apple (AAPL - Get Report) making moves across borders.

Tesla stock were climbing 2.9% to $277.95 on news of the investment, which Tencent said was passive. Tencent shares were rising 1.3% to $29.45.

The investment comes as Tesla ramps up for the launch of its mass-market Model 3, an electric car with a projected $35,000 price tag.

Musk's company said in March that it would sell $1.2 billion in stock and convertible notes to provide capital for the roll out, and that it could raise close to $1.4 billion in underwriters buy securities in the offering. The fundraising was at the lower end of expectations for analysts, with some suggesting that Tesla could raise $3 billion to fund the launch of the Model 3. 

Tencent, with close to $22 billion in revenue, has interests ranging from instant messaging platform WeChat to digital payments, games and news. Tencent is also an investor in mapping and location-based technology outfit HERE, which has backing from automakers such as BMW and Daimler and chipmaker Intel (INTC - Get Report) , which is buying smart car technology outfit MobileEye (MBLY) and wants a bigger role in self-driving cars.

Apple invested $1 billion in Chinese ride-sharing company Didi last year. Didi has shown an increased interest in smart car technology, announcing that it would build a research and development facility in Silicon Valley to explore applications for artificial intelligence in automobiles. 

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