China’s big tech groups miss out on AI stock market frenzy

{"text":[[{"start":7.8,"text":"China’s big tech companies including Alibaba and Tencent have missed out on this year’s blistering stock market rally for other Chinese groups connected to AI."}],[{"start":16.85,"text":"China’s CSI artificial intelligence index, which tracks companies in the AI supply chain, has soared by more than 28 per cent this year. However, Hong Kong’s Hang Seng Tech index, where many of China’s big tech powerhouses are listed, has shed more than 8 per cent over the same period."}],[{"start":34.55,"text":"Taobao owner Alibaba and WeChat operator Tencent, two of the largest constituents in the Hang Seng Tech index, have fallen 6.7 per cent and 23.7 per cent respectively this year."}],[{"start":47.75,"text":"The two groups are mainstays for international investors seeking exposure to China and have been used as a measure of the country’s technology industry."}],[{"start":56.7,"text":"However, investor excitement this year over AI has not spread to Alibaba and Tencent — two of China’s most valuable companies. "}],[{"start":null,"text":"

"}],[{"start":64.95,"text":"Investor concern that Tencent’s AI investments will weigh on profitability has held back the stock. Meanwhile, Alibaba has been fighting an expensive subsidy war in the online shopping market, which has abated but was still weighing on profits. "}],[{"start":79.45,"text":"“The market is making a clear distinction between Big Tech in China and chips and AI models,” said Wee Khoon Chong, a senior strategist at BNY. "}],[{"start":88.3,"text":"Joanna Yang, a portfolio manager at Ninety One, said there were growing concerns that large language models from Tencent and Alibaba had not kept pace with those from smaller Chinese competitors such as Zhipu and MiniMax. Since their IPOs at the start of the year, shares in Zhipu and MiniMax have surged 622 per cent and 318 per cent respectively."}],[{"start":112.55,"text":"“You have more attention being paid to the pure AI plays like large language model companies. People see Tencent as a laggard in AI development,” Yang said."}],[{"start":122,"text":"“In the past people saw Tencent as a leader. It’s a question mark now. Is it still a leader in the next wave of technology development?” "}],[{"start":null,"text":""}],[{"start":130.55,"text":"Analysts said the divergence pointed to a shift in the balance of power within China’s technology sector. "}],[{"start":136.95000000000002,"text":"“In the old days if you were bullish on China you bought big Chinese tech companies listed in Hong Kong. Those were the benchmarks,” said Chong. "}],[{"start":146.70000000000002,"text":"Bush Chu, a China equity portfolio manager at Aberdeen, said a similar divergence was taking place in the US: “Generally the hardware companies are outperforming a lot versus the Magnificent Seven.”"}],[{"start":157.8,"text":"Ninety One’s Yang said China’s AI companies were benefiting both from Beijing’s drive for self-sufficiency and the surging global demand for components needed for AI infrastructure. "}],[{"start":168.75,"text":"“When you compare these companies to the internet platform companies you notice that the growth is quite different. You’re talking about double-digit growth for the semiconductor and hardware companies that go into the AI supply chain,” she said. "}],[{"start":182.35,"text":"China’s self-sufficiency drive in chips benefits companies such as AI chip designer Cambricon Technologies, while global demand for products such as optical transceivers has boosted share prices of the components’ Chinese manufacturers. "}],[{"start":196.04999999999998,"text":"Shares of Cambricon have risen 183 per cent in the past 12 months, although that pales in comparison with the 944 per cent surge for Zhongji Innolight, one of China’s top manufacturers of the optical transceivers needed in AI data centres. The Hong Kong-listed shares of SMIC, China’s largest chip foundry, are up more than 67 per cent over the same period. "}],[{"start":221.1,"text":"Washington has blacklisted a number of Chinese AI companies including SMIC, meaning US-based citizens and entities incorporated in the country cannot invest in them. "}],[{"start":null,"text":""}],[{"start":231.04999999999998,"text":"Despite simmering geopolitical tensions, foreign capital began returning to China’s stock market last year, ending a protracted period of outflows. Data from BNY shows that global investor interest in China’s stocks has continued rising this year."}],[{"start":247.74999999999997,"text":"Yet excitement around innovation in China is no longer as focused on the big technology names that previously dominated global investor attention."}],[{"start":256.75,"text":"“It’s not as attractive now as AI. The market is increasingly seeing them as old tech rather than AI,” said BNY’s Chong. "}],[{"start":271.34999999999997,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778650876_1194.mp3"}