Credit Suisse expects that the first-quarter profits of Chinese cloud service providers will exceed expectations, estimating that Baidu Cloud and Alibaba Cloud revenues will increase by 40%

Chinese tech stocks rose this morning (16th), with Alibaba (09988.HK) up 4.6% to HKD 134.5, Tencent (00700.HK) up 2.8% to HKD 513, Baidu (09888.HK) up 8.4%, and NetEase (09999.HK) up 4.6%.

Credit Suisse released a report on Chinese tech stocks, previewing the first-quarter performance of the Chinese internet and technology sector, expecting AI-driven cloud revenue to accelerate and logistics and e-commerce performance to exceed expectations. The firm analyzed the earnings outlook of about 20 different industry companies over the past two weeks, finding that cloud service providers (CSPs) performed better than expected; progress in various verticals met or exceeded expectations; the logistics industry benefited from the "anti-involution" trend and strong execution; online shopping and entertainment businesses generally met forecasts.

The firm estimated positive surprises included Baidu (09888.HK) exceeding expectations for smart cloud infrastructure revenue, as well as JD.com (09618.HK) and JD Logistics (02618.HK) performing better than expected in the first quarter. The firm maintained its preferences and rankings for various sub-industries.

The firm expects Baidu's AI cloud infrastructure revenue to grow over 40% year-on-year, significantly higher than market consensus. Alibaba Cloud's revenue is also expected to grow 40% year-on-year, benefiting from a surge in AI demand and increased token consumption. Kingsoft Cloud (03896.HK) raised its full-year outlook, and Tencent Cloud's revenue accelerated. Chinese cloud service providers will raise prices this week due to tight supply and strong demand. In the AI lab sector, MiniMax (00100.HK) and Zhiyu (02513.HK) both showed strong growth.

The firm stated its stock preferences in the industry: Alibaba and Tencent (00700.HK) are the top picks, followed by Baidu, JD.com, MiniMax, Kingsoft Cloud, NetEase (09999.HK), Kuaishou (01024.HK), Bilibili (09626.HK), Meituan (03690.HK), JD Logistics, ZTO Express (02057.HK), Jitu (01519.HK), Trip.com (09961.HK), Tongcheng (00780.HK), Huazhu (01179.HK), Ato (ATAT.US), Pinduoduo (PDD.US), BOSS Zhipin-W (02076.HK), Manbang (YMM.US), Beike-W (02423.HK), Vipshop (VIPS.US), Meitu (01357.HK), Huya (JOYY.US), SF Express (09699.HK), Damai Entertainment (01060.HK), Tencent Music (01698.HK), NetEase Cloud Music (09899.HK), and Qifu Technology (QFIN.US)