Alibaba and Tencent Are Losing the AI Race to China’s New Guard
Water flows to the lowest point, and now, so do AI investors. Just as US investors made the same trade from Big Tech to AI infrastructure, China’s CSI AI index, a supply chain benchmark, surged 28% this year. In contrast, the Hang Seng Tech index shed 8% as the home to China’s biggest names slipped out of favor.
- China’s AI infrastructure plays, encompassing chips and optical networking, are winning — as fresh IPOs like Zhipu and MiniMax surged ~4x-7x in the past year.
- Meanwhile, heavyweights AlibabaBABA and TencentTCEHY missed sales estimates — withBABA’s adjusted profit down 99% asTCEHY’s AI spending doubled.
Old tech, new problems: For China’s most valuable firms, the rotation is becoming an identity crisis. BNY strategist Wee Khoon Chong says markets are drawing a hard line between big tech platforms and pure AI plays, with the “old tech” label now creeping in. To narrow the gap, Alibaba expects AI to account for half of cloud revenue within a year, and Tencent is betting on AI agents, but this ambitious growth hasn’t excited investors, with both stocks down YTD. Plus, as smaller rivals steal the spotlight, the recovery looks steeper every day.