Yuanbao

Yesterday $TENCENT(00700.HK) $Tencent(TCEHY.US) rallied sharply. It was driven not only by the public rollout of the 'Lobster' bundle — Workbuddy (a desktop AI agent workspace for office use, compatible with OpenClaw skills), QQ-bot (an IM-focused bot that connects to the OpenClaw bot), and Qclaw (one-click OpenClaw deployment with WeChat/QQ integration). A report from The Information also helped: a WeChat Agent is coming, with limited testing around mid-year and a full rollout in Q3.

The WeChat Agent is not new; Tencent started the project last year, likely built on Mini Programs within the WeChat ecosystem. It appeared in Q2–Q3 channel checks and on Tencent's earnings call, but management held back from spotlighting it given lagging base models, the need to ensure UX, and compute constraints.

While broadly expected, the strong market reaction stems from two factors. First, Yuanbao's setbacks in the early-year AI bot race dented sentiment. Second, the leaked timeline for WeChat Agent — unconfirmed — raised expectations; Dolphin Research expects a phased launch prioritizing UX, so actual timing may slip.

Amid a proliferation of AI entry points, anchoring the AI narrative around the WeChat ecosystem reignites confidence in Tencent's AI. With earnings next week, attention is also shifting to its solid fundamentals, with meaningful runway in ads and scheduled tentpoles such as 'Honor of Kings: World' and 'Roco Kingdom'. As a result, at an Approx. RMB 4tn market cap and ~13x P/E, sentiment has started to recover.

Looking to next week's print, we expect focus not only on ads and games growth in 2024 but also on Tencent's AI progress and roadmap. If, as The Information suggests, WeChat Agent proceeds smoothly and goes full scale in Q3, compute capacity and costs will come under scrutiny. Some investors will also worry about higher spend weighing on near-term profit and shareholder returns.

This Lunar New Year, China’s tech giants kicked off a new round of AI wars.

Alibaba launched a ¥3B “Spring Festival Treat” campaign, driving 10 million free milk tea orders in 9 hours across its platforms. Tencent invested ¥1B into WeChat’s “Yuanbao” AI red packets to deepen engagement.

ByteDance took another path — its Dream platform released Seedance 2.0, a video AI model that boosts usable output for short clips to over 90%, far above the ~20% industry average.

Beyond subsidies, this battle is about who can truly integrate AI into daily life. The holiday rush helps shape habits, gather data, and train models — all aiming to become the go-to “AI ask” gateway.

The winner won’t just get traffic, but could define the super-app of the AI era.

So — who’s your pick? Alibaba’s commerce, Tencent’s social grip, or ByteDance’s tech edge?

$Alibaba(BABA.US)$BABA-W(09988.HK)$BABA-WR(89988.HK)$Tencent(TCEHY.US)$TENCENT(00700.HK)

The Battle for the AI Gateway: Who Wins?This Lunar New Year, China's tech giants unleashed a new wave of AI application wars. Alibaba's "Spring Festival Treat" campaign, backed by ¥3B, offered deals across e-commerce and local services, logging 10 million free milk tea orders in 9 hours. Tencent doubled down on its WeChat ecosystem, investing ¥1B into its "Yuanbao" AI red packet feature to boost engagement.ByteDance played a different card. Its Dream platform launched Seedance 2.0, a new video AI model. A key breakthrough: it boosted the usable output rate for 15-second clips to over 90%, far above the ~20% industry average, slashing generation costs.Beyond subsidies, this battle tests real AI integration and ecosystem strength. The holiday season is a prime testing ground to shape user habits, collect data, and train models—all fighting to become users' first-choice "AI ask" portal.The stakes? It's not just about traffic. It's about defining the super-app gateway for the AI era, which will ripple across the entire investment landscape.So, who's your pick for the ultimate AI gateway? Alibaba with its commerce power, Tencent with its social lock-in, or ByteDance with its tech edge?

$TENCENT(00700.HK) 0700 has looked downright ugly lately, mainly because Tencent has been far quieter on AI than other tech majors. As the battle heats up for the next-gen user interface entry point, the company seems unhurried.Before our deep-dive on the company is out, Dolphin Research offers a quick take.

Bulls argue Tencent is adept at late-mover catch-up, and its composure comes from owning the market’s most comprehensive social graph. Users may scroll Douyin or shop on Taobao, but they still return to WeChat to check messages and new posts from favorite Official Accounts.So Tencent can afford to watch and iterate on what an AI super-entry should look like.

Bears counter that even if users can’t ditch WeChat in the near term, time spent can still be eroded, as short video did to Tencent’s broader ecosystem. As users grow accustomed to new interaction models, social graph migration isn’t impossible over the long run, as seen with Weibo before, and even QQ to WeChat.

These scenarios assume Tencent has no counter for a long stretch, which isn’t the case. The biggest move is a talent grab, with a heavy push on LLM hiring and team build-out to make up for base model R&D and org design over the past two years.What looks like restrained capex may also reflect objective constraints.

As Dolphin Research noted in prior discussions on China big tech and AI, 2024 will see a tougher fight for consumer AI entry points. With Q1 being the prime window for exposure, expect plenty of moves from the majors.We already saw Doubao make the Spring Festival Gala, and yesterday Qwen Agent rolled out a broader commercial ecosystem. What about Tencent? What will Yuanbao play next? Dolphin Research will be watching.

Lastly, while Alibaba’s Qwen has topped search trends these past two days, Tencent quietly issued a results pre-announcement and detailed the 2026 WeChat Open Class. Against sell-side expectations, here’s the quick read:

(1) Q4 fundamentals: steady growth, in line with expectations.

a. Revenue: low-teens growth. Ads and games remain strong; ads benefit from Video Accounts and AI-driven efficiency, games from ‘Delta Force’ momentum.QoQ, growth may ease on last year’s high base and a one-off buyout revenue contribution from overseas titles in Q3. FinTech is constrained by subdued consumption, while enterprise services benefit from WeChat e-comm and Mini Program ecosystems; in AI cloud, Tencent has limited external GPU leasing to prioritize internal demand, so growth should hold its run-rate without a clear acceleration.

b. Profit: while higher R&D and depreciation weigh, better GPM and disciplined opex should keep profit growth well above revenue growth, near ~20% YoY.

(2) WeChat Open Class: updates focus on WeChat Shops (service providers driving rapid GMV growth) and Mini Games (to cushion the impact from new rev-share rules by Apple and WeChat, the company will offer new-title incentives for developers).For Mini Program AI enablement, management targets a 2x scale increase in 2025 and plans to launch an AI app growth program.

WeChat remains the most promising landing zone for AI Agents, anchoring the bull case for Tencent’s AI future. That said, given the need to serve the full user base, product refinement and adequate infrastructure must be in place before a full rollout.