How will China monetise AI differently?
China will be a close and capable AI follower, focusing on downstream implementation as the US focuses on upstream. This means the two will not run head-to-head encounters right away, and China can lead in the application of AGI in manufacturing and logistics. Its monetisation path will be more complex but can exist. However, as it stands, China is under-monetising AI vs the US. The Blue Lotus team estimate that consumer (2C) AI applications generated $2.0–3.5bn in the US and $0.3–0.5bn in China (excluding AI-enabled advertising and much of video AI). The US monetises AI globally, with global 2C revenues bringing in ~12x that of China. However, the gap will shorten significantly by 2030, in part by taking a lead on robotics+AGI. The team reiterate their top picks of Alibaba, Hesai, CATL and Kuaishou. Baidu stays as a sell.
Edition: 221
- 03 October, 2025
Communications
Arete upgrades the stock to Buy from Sell based on their outlook for chip business growth and AI Cloud revenue/profit. Kunlun (Baidu’s in-house AI chip) supports China’s national AI strategy in an undersupplied domestic market, with large orders from No.1 customer China Mobile. Arete sees Kunlun sales rising from RMB2bn in ’24 to RMB10-12bn in ‘26E. Kunlun should continue to drive Baidu’s AI Cloud business, with “Other Services” revenue rising at a ~15% CAGR over 2025E-31E. Arete raises their ‘26E EPS to US$6.1 from US$3.7. While they still see risk from declining Ad revenue, they think this is a long-running problem and well understood by the market. Their SOTP model shows Ads make up only 17% of Baidu’s total value vs. ~59% for AI silicon and Cloud services.
Edition: 220
- 19 September, 2025
Tencent (700 HK) & NetEase (NTES US) US
Technology
While China’s e-commerce sector is mired in subsidy fuelled competition, Arete argues this is outweighed by strength in gaming and online entertainment. Record approvals and blockbuster titles underpin upgrades for Tencent and NetEase, while Alibaba shows early signs of a turnaround in quick commerce and cloud. The report also examines mounting cost pressures at Meituan, the lack of near term catalysts at Xiaomi and SEA, and the structural headwinds still facing JD and Baidu.
Edition: 219
- 05 September, 2025
China’s recent high-profile meeting with private entrepreneurs signalled Beijing’s strategic priorities, highlighting firms advancing state goals while sidelining others. Key invitees included Alibaba, Tencent and Huawei, while Baidu, ByteDance and JD.com were absent. This distinction suggests Beijing’s support for companies driving innovation in AI, advanced manufacturing and strategic industries like EVs and semiconductors. Xi Jinping reinforced the Party’s control, urging businesses to serve national interests and promote "Common Prosperity". Firms like DeepSeek, Alibaba and BYD align with these objectives. Conversely, Baidu and other omitted firms may face tolerance but lack government backing.
Edition: 206
- 07 March, 2025
Tactical trading will struggle in 2025
According to Paul Krake, the problem is that every trade of a tactical nature is influenced by Trump policy. In his latest report, he sets out his view over the next six months. Expect China to work on AI plays like Alibaba, Baidu and Tencent, as AI remains a leading driver of global beta. Investors can benefit from staying LONG commodities and infrastructure plays, especially electricity. Stick to the world’s best firms, many of which are US-based, whilst fading Germany in light of the inevitable EU recession. Stay away from rates and currencies as long as the Fed isn’t moving. Finally, when it comes to crypto, investors are looking at a clear Trump favourite and should see zero reasons to sell.
Edition: 205
- 21 February, 2025
Asia Ex-Japan Funds: Extreme stocks
In this report, Steven Holden screens for stocks at the extreme ends of their positioning or momentum ranges. He synthesizes current and historical data on fund positioning with recent manager activity to accurately assess sentiment for each stock. Stocks in focus this month: High Positioning, Positive Momentum: KE Holdings and Shriram Finance. High Positioning, Negative Momentum: Axis Bank and NARI Technology. Low Positioning, Negative Momentum: Baidu and BOC Hong Kong. Low Positioning, Positive Momentum: Hon Hai Precision Industry and Tenaga Nasional.
Edition: 198
- 01 November, 2024
Communications
Richard Windsor remarks on how Baidu is now the biggest & cheapest AI ecosystem in the world. While OpenAI is withdrawing from China, Baidu has already moved to fill the void as its users have jumped by 50% since Apr. There appears to be very little competition for the company in the world’s second-largest market, meaning that it could easily take the whole market and earn high margins on its revenues. Hence one would expect the shares to be riding high, but they are down over 15% YTD. No one right now wants to hear anything about investing in China which is exactly the time when one should consider buying.
Edition: 190
- 12 July, 2024
China: Cautious ad spending outlook but branding ads likely to be driven by major 2024 sports events
Communications
From Westlake's primary research, most large advertisers remain cautious about their 4Q ad spending and 2024 ad allocation outlook, but the UEFA European Football Championship and Paris Olympics this year will likely drive branding ad spending growth. Baidu can deliver 4Q online marketing (primarily search and feed) revenue growth at least in line with street expectation of 5-6% given the strength from medical, eComm, EV, travel and restaurants, offsetting some share loss to closed-loop searches within mega or popular apps. Tencent saw solid 4Q social ads, healthy online video ads & subscriptions and in line global game performance, and is likely on track to meet street revenue expectation. Westlake continues to see strong growth momentum from Tencent's Video Account ads.
Edition: 178
- 26 January, 2024
Communications
Following several years of sustained revenue share loss, Search’s digital advertising revenue market share has stabilised at ~10%. With China’s economic growth recovery, Baidu is perfectly positioned to accelerate its core marketing revenue growth, which is also a high-margin operation. This revenue mix effect, coupled with improvement in margins at its peripheral non-marketing operations, should boost operating margins (consensus forecasts of 14.2% in FY23 and 15.6% in FY24 appear conservative) and drive significant earnings growth acceleration. The stock is up 30% YTD, but continues to trade at a significant discount to its 5-yr average and global peer group.
Edition: 155
- 03 March, 2023
Baidu (9888 HK) & Tencent (700 HK)
Communications
From Westlake's primary research, they observed 4Q online ad spending fared better than offline and grew modestly Q/Q despite Covid disruptions, while industry professionals are cautiously optimistic about their ’23 ad spending outlook. Baidu can meet 4Q online marketing revenue growth expectation given budget shift from branding ads to performance ads and offline ads to online. Tencent likely saw 4Q revenue growth in-line with consensus forecasts. Its game biz remained weak, but can meet street estimates and return to growth in ’23 propelled by new game approvals and international game launches. They also saw strong growth momentum from WeChat Channels ads.
Edition: 152
- 20 January, 2023
Communications
Better-than-expected revenue growth from its non-marketing core business as well as strong cost control provided a positive surprise to 1Q22 results. However, evidence remains that Baidu continues to lose digital advertising revenue market share and that its new growth driver engines (AI Cloud and Intelligent Driving) negatively contribute toward operating margins and are unlikely to drive positive earnings surprises over the medium-term. In this insight, Wium Malan looks at the Chinese digital ad market, Baidu’s market share loss, and assesses whether AI Cloud and Intelligent Driving could compensate to deliver earnings growth surprise.
Edition: 138
- 24 June, 2022
Power struggles set China up for a fall: Sell US-listed Chinese stocks
Constant flow of negative news on US-listed Chinese names - regulatory pressure from Beijing, delisting pressure from Washington and energy / power shortages pressure Chinese stocks. Higher tensions over Taiwan raise the risk of an accidental escalation. ETF favourites like Alibaba and Baidu would get hurt the most.
Edition: 122
- 29 October, 2021