Shares of Tencent Holdings sank 7% in Hong Kong trading Tuesday after the WeChat parent was added by the U.S. Department of Defense to its list of "Chinese military companies."

Tencent, as well as EV battery maker CATL, were among companies included in the update to the Section 1260H list, which is updated annually and lists companies that work with the Chinese military. The blacklist doesn't carry any penalties but bans the companies on it from doing business with the Pentagon.

CATL—officially Contemporary Amperex Technology Co., Ltd.—is a major supplier to Tesla (TSLA) as well as Chrysler and Jeep parent Stellantis (STLA). Its shares fell 2% on the Shenzhen Stock Exchange.

Tencent Says Designation Is 'Mistake'

"As the Company is neither a Chinese military company nor a military-civil fusion contributor to the Chinese defense industrial base, it believes that its inclusion in the CMC List is a mistake," Tencent said in a filing to the Hong Kong Stock Exchange.

CATL, meanwhile, said it will work with the Pentagon to "address the false designation, including legal action if necessary."

The U.S. imposed export controls on advanced semiconductor chips aimed at curbing China's access in 2023. Such curbs have already made it harder for American firms like Nvidia (NVDA) and Intel (INTC) to sell AI chips to China.