Meta Platforms Inc. (META) might have a problem on its hands with its recent $2 billion acquisition of AI firm Manus. The Chinese government is taking a closer look at whether the deal sidestepped technology export controls, and that's not exactly the kind of regulatory attention any company wants.

The Singapore Shuffle Draws Questions

Here's what caught Beijing's eye: Manus relocated its staff and technology from China to Singapore, then promptly sold itself to Meta. The Chinese Ministry of Commerce is now investigating whether that move required an export license under Chinese law, according to a Financial Times report on Wednesday.

The review is still early, but it could give Chinese authorities considerable influence over the transaction. In a worst-case scenario for Meta, Beijing could force the parties to unwind the deal entirely.

Manus operates through Singapore-based Butterfly Effect Pte, but the technology was partly developed by its sister company in Beijing. That entity was founded in 2022 by CEO Xiao Hong and colleagues, and while it's still registered in Beijing, its offices were reportedly empty as of August. The Singapore relocation happened after a funding round led by U.S. venture capital firm Benchmark, which itself triggered scrutiny from the U.S. Treasury under new rules governing American investment in Chinese AI companies.

Meta did not immediately respond to requests for comment on the Chinese review.

AI Ambitions Meet Geopolitical Reality

For Meta, the Manus acquisition represented a strategic play to boost its AI capabilities and compete more aggressively with OpenAI. The deal, announced in late December, aimed to integrate Manus technology into Meta's products as part of a broader AI expansion that also included acquiring Scale AI earlier in the year.

But the Chinese government's investigation highlights how difficult it's becoming for tech companies to navigate the increasingly fraught competition between the U.S. and China over advanced technologies. What looks like a straightforward acquisition from one angle can appear very different from another country's regulatory perspective.

The outcome could have significant implications not just for Meta's future dealings in the Chinese market, but also for other companies considering similar transactions involving AI technology with Chinese origins.

According to proprietary data, Meta holds a momentum rating of 27.15% and a quality rating of 95.60%.

Price Action: Over the past year, Meta stock climbed 6.92%. On Tuesday, shares edged 0.28% higher to close at $660.62.