"Big Banks" JP Morgan: It is too early to determine the ultimate winner in the AI application market, prefers Alibaba, Baidu, and Kuaishou

JP Morgan published a research report indicating that consumer behavior is changing, with users' methods of obtaining information and consuming content gradually evolving. Chatbots are becoming a new "starting point" for searching, recommending, and executing tasks. The bank believes that large internet platforms are now willing to invest real marketing funds to accelerate adoption, which will mechanically increase reasoning volume and drive rapid growth in Token consumption. JP Morgan favors beneficiaries of China's AI infrastructure, such as Alibaba (09988.HK) and Baidu (09888.HK), as well as online advertising beneficiary Kuaishou (01024.HK) as secondary winners, as the bank believes it is still too early to judge the lasting winners and losers of AI applications.

Morgan Stanley predicts that China's Token consumption will achieve a compound annual growth rate of approximately 330% between 2025 and 2030. Meanwhile, the supply-demand imbalance in GPU computing power is expected to persist in the coming years. The bank believes this makes China's AI infrastructure one of the most attractive investment themes within its TMT coverage.

Some investors have pointed out that Tencent (00700.HK) seems to be advancing its AI products more cautiously than some of its larger platform peers, raising concerns about potential valuation compression. The bank believes that the market has already reflected a large part of this concern, with the stock currently trading at a valuation of 15 times the forecasted price-to-earnings ratio for 2026, only about 25% higher than historical lows, while core earnings outlook remains robust. The bank believes that Tencent's most enduring asset is not any single AI capability, but rather its distribution and engagement, which tends to compound over time and allows new capabilities, including AI, to scale at a lower user acquisition cost than peers.

The bank believes that even with current growth being relatively cautious, AI remains an important upside option: Tencent's advantage lies in embedding AI into high-frequency application scenarios (such as search, content, and mini-program workflows), which can drive monetization without Tencent needing to win in the frontier model race, and recommends buying on dips