China needs to boost its tech sector more than ever. How to play it
Chinese tech companies raced to launch new products in a week that saw Beijing double down on its calls to support artificial intelligence. An obscure Chinese startup that goes by the name Monica on Wednesday announced an invite-only AI application called Manus that claims to streamline analysis of resumes and financial information using several models from companies such as OpenAI, DeepSeek and Anthropic. “The innovation is probably not as significant as DeepSeek,“ in our view, Nomura China technology analyst Bing Duan and a team wrote Thursday. “However, we believe this product is yet another example of China’s accelerated AI innovation.” “We believe that the AI infrastructure investment upcycle has started in China’s AI value chain, which should benefit from leading suppliers exposed to China’s major Internet/Telecom companies’ capex on cloud and AI infrastructure,” the analysts said. Three of their picks are mainland China-listed printed circuit board companies that have partnerships with China AI tech leaders, according to Nomura: Shennan Circuits, Shengyi Technology and WUS PCB. The firm also likes Shenzhen-listed Accelink for its position as a leading supplier of optical transceivers which can facilitate the high-speed data transmissions needed to develop AI. Nomura rates all four stocks as buys. Tech’s leadership in Chinese stocks As China faces increased tariffs and slowing economic growth, policymakers in the last week announced a rare increase in its deficit — along with plans to ramp up subsidies for consumer trade-ins and financing for tech companies. Several senior officials publicly lauded the rise of DeepSeek AI, and they emphasized how restrictions have only pushed Chinese companies to work harder on tech. The messaging on technology is “encouraging, a strong signal to support both innovation and the private sector,” Nicholas Yeo, head of China equities at abrdn, said in a note. “With valuations of the internet sector cheap relative to U.S. counterparts, alongside the support of the authorities to boost the nation’s AI capabilities, we think this remain a very attractive opportunity for investors,” he said. Hong Kong’s Hang Seng Index gained 5.6% last week while hitting a three-year high. The CSI 300 fell by about 1.4% for the week. Tech has led most of the recent gains in Chinese stocks, which is reflected in the outperformance of the Hang Seng Index versus mainland Chinese stocks, known as A shares, said Aaron Costello, head of Asia at Cambridge Associates. He pointed out that most major Chinese tech names are traded in Hong Kong. If China’s stimulus starts to see economic results, A shares should see another leg up as gains broaden out, he said. Tencent and AI Helping the Hang Seng Index’s gains was a surge in Alibaba’s Hong Kong-traded shares to a new 52-week high. The e-commerce company revealed a new AI reasoning model that it claims performs just as well as DeepSeek’s R1 model. Tencent , also traded in Hong Kong, a week earlier launched the latest version of its Hunyuan AI model, Turbo S, which claims to beat DeepSeek V3 , OpenAI’s GPT-4o, Claude 3.5 Sonnet and Llama 3.1 on certain key metrics such as MMLU, Math and Chinese. Tencent also released a new T1 reasoning model based on the Turbo S. The T1 is currently accessible through the Yuanbao app, which says it also offers DeepSeek access. “We’d argue the last few weeks have presented ample evidence in favor of Tencent’s ability to productionize AI,” Bernstein China Internet analyst Robin Zhu and a team said in a report Wednesday that named Tencent their top China AI play. “Tencent’s recent moves on implementing DeepSeek within its family of apps make it clear that this was one of the times Tencent’s top management decided the troops must be rallied for a common goal,” the analysts said. “The company has moved quickly to implement DeepSeek across its family of digital ecosystems — including WeChat and AI assistant Yuanbao, but also Peacekeeper Elite within the video gaming portfolio.” The Bernstein analysts raised their price target on Tencent to 640 Hong Kong dollars, up from 540 HKD, for upside of 20% from Friday’s close. The firm rates the stock overweight. “Tencent’s AI assistant Yuanbao is now being downloaded at a faster rate than both Bytedance’s Doubao and the DeepSeek app,” the analysts said. “Social advertising is a tried and tested monetisation pathway for AI advancements, and Yuanbao growth potentially sets up a larger search ads business over time.” Tencent is set to release quarterly results on March 19. — CNBC’s Michael Bloom contributed to this report.
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