Analysts at Citi have highlighted three Chinese internet stocks they believe offer the strongest exposure to artificial intelligence (AI) growth, according to a research note published this week. The bank named Baidu, Tencent, and Alibaba as its top picks in the sector, pointing to their significant investments in AI infrastructure and monetisation potential.
The recommendations come amid a broader shift in global investor sentiment towards Chinese technology stocks, which have been buoyed by recent regulatory stability and improving economic data. Citi noted that all three companies have made substantial progress in integrating AI into their core businesses, from cloud computing to autonomous driving and enterprise software.
Baidu, often described as China's answer to Google, has been at the forefront of AI development with its Ernie chatbot platform. Tencent, the owner of WeChat, is leveraging AI across its gaming, advertising, and cloud divisions. Alibaba, the e-commerce and cloud giant, has also doubled down on AI through its Tongyi Qianwen model and cloud services.
The report from Citi arrives as UK investors increasingly look beyond US tech giants for AI exposure, given the elevated valuations of companies such as Nvidia and Microsoft. Chinese internet stocks, by contrast, trade at relatively lower price-to-earnings ratios, offering a potential value play for those willing to accept geopolitical risks.
For UK pension funds and retail investors with exposure to emerging market funds, the Citi note underscores the growing importance of AI as a thematic driver in Chinese equities. However, analysts caution that regulatory shifts and US-China trade tensions remain key risks that could affect the performance of these stocks.