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Recent developments highlight how Chinese companies, including DeepSeek and ByteDance, are advancing rapidly in artificial intelligence (AI), building competitive alternatives to OpenAI’s ChatGPT. These efforts are moving beyond chatbots to make innovative applications for businesses and consumers.
The adoption of generative AI among Chinese businesses is growing, with over 10% now using the technology, up from 8% six months ago, according to Ben Yan, a director analyst at Gartner, as quoted on CNBC.
Baidu’s AI-Integrated Tools See Growth
Baidu BIDU, known for its search engine and Ernie chatbot, reported notable traction with its AI-integrated Wenku platform, which enables users to generate PowerPoint presentations and other documents quickly. As of 2023, the platform had 40 million paying users, contributing to a 60% year-over-year revenue increase.
Tencent's AI Agent Plans for WeChat
Tencent TCEHY is preparing to integrate AI agents into WeChat, its popular messaging and social media app. CEO Pony Ma revealed the plans during a Jan. 13 address, indicating a push into AI-driven automation and user interaction.
AI Applications for Global Markets
Chinese AI applications are also making global entries. For example, Alibaba's Accio, an AI-powered search engine for product sourcing, has attracted 500,000 small business users globally.
Some Chinese Tech Stocks Offer Value
Chinese technology stocks are now value stocks: They are favoring dividends and buybacks lately.
Alibaba’s (BABA) P/B (Most Recent Quarter or MRQ) is 1.45X versus the underlying Internet - Commerce industry’s P/B of 1.81X. Price/Cash Flow (Most Recent Fiscal Year or MRFY) is 8.51X versus the industry measure of 16.69X.
Baidu’s P/B is 0.81X versus the underlying Internet – Services industry’s P/B of 2.01X. Price/Cash Flow (Most Recent Fiscal Year or MRFY) is 4.96X versus the industry measure of 12.35X. This year, both Alibaba and Baidu are experiencing a slower growth rate compared to the industries they operate in.
Meanwhile, Tencent is different as it has a higher growth rate than the underlying Internet – Services industry as well as the S&P 500. Investors are also rewarding the stock with higher price premiums as the stock has higher P/E, P/B and P/CF than the industries.
Any Weaknesses?
Despite the potential for growth, there are inherent weaknesses in the space. The tech sector's reliance on government policies and the ongoing geopolitical landscape pose risks to the stability of investments. Plus, most Chinese tech companies’ growth rates are below their underlying operating industries.