JPMorgan analysts suggest that the recent rally in Chinese tech stocks, fueled by advancements in generative artificial intelligence (AI), is likely more sustainable than last year's surge. In their report, they emphasize that while predicting the duration of this AI-driven momentum in Chinese internet stocks is challenging, it is unlikely to be a short-lived trend.
Drawing lessons from the U.S. AI market, the analysts note that long-term disruptive developments in fundamentals can lead to sustained valuation re-ratings, provided there is positive national or market beta and continuous positive developments at the company level.
JPMorgan advises investors to focus on stocks that are currently benefiting from China's AI advancements. They caution against investing in companies like Tencent and Baidu, which are perceived as lagging in the AI field. Instead, they highlight Alibaba (BABA, Financial) as a more favorable investment at this stage, given its advantageous position in the development of generative AI in China.
