Since the launch of DeepSeek on January 24, the HSTECH has grossed surges about 20%, fueled by a number of AI-related developments, including ByteDance's and BABA-W (09988.HK)'s launch of cost-effective large language models (LLMs), DeepSeek's integration into the Chinese and U.S. platforms, and reports of a possible partnership between Apple (AAPL.US) and Alibaba, as well as reports that Chinese President Xi Jinping may host a forum with business leaders, Morgan Stanley’s report said.
The broker saw lower training or reasoning costs to drive faster, favoring BIDU-SW (09888.HK), Alibaba, TENCENT (00700.HK) (collectively known as “BAT”). As the results period is approaching this week, the broker considered the market will focus more on management's comments on AI (e.g., applications, monetization and capex) than on core business performance.
Among them, Tencent remains the broker's top pick as it is already pampered by AI-driven ad tech upgrades on the monetization front, whereas the rollout of AI features in WeChat (e.g., access to DeepSeek for gray testing) is expected to be a catalyst.
Secondly, the broker preferred Alibaba and maintained its Equalweight rating on Alibaba (BABA.US), believing that the stock's recent gains have reflected the upside from its cloud business. Under the base case, the broker foresaw Baidu's cloud revenue to grow at an average annual rate of 18% to RMB163 billion in 2026 and 2027, with EBITA margins stabilizing at 15%. Under the bullish case, the broker estimated cloud revenue growth to accelerate to 20% and 25% in 2026 and 2027 to RMB179 billion, with EBITA margins of around 20%.
As for Baidu (BIDU.US), the broker kept an Equalweight rating on the company. Although the company has a first-mover advantage in its all-AI strategy, its core search business faces the risk of being affected by generative AI, and the intensified competition from Tencent and ByteDance makes monetization uncertain.
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AAStocks Financial News
Web Site: www.aastocks.com
| SG Top Picks |
| Stock & Type |
Code |
Strike(Call Level) |
Last |
Effective Gearing |
| TENCT (C) |
13940 |
630.5 (-) |
0.179 |
7.6 X |
| TENCT (C) |
28713 |
598.93 (-) |
0.133 |
9.8 X |
| TENCT (C) |
13832 |
580.5 (-) |
0.265 |
7.1 X |
| TENCT (C) |
29059 |
538 (-) |
0.335 |
7.3 X |
| TENCT (P) |
13938 |
363.8 (-) |
0.060 |
6.8 X |
| TENCT (P) |
28010 |
349.8 (-) |
0.028 |
8.5 X |
| TENCT (Bull) |
56270 |
491 (494) |
0.060 |
17.2 X |
| TENCT (Bull) |
56236 |
480 (483) |
0.078 |
13.3 X |
| TENCT (Bear) |
56237 |
556 (553) |
0.066 |
15.7 X |
| TENCT (Bear) |
55892 |
541 (538) |
0.044 |
23.5 X |
| BAIDU (C) |
29131 |
120.1 (-) |
0.124 |
4.6 X |
| BAIDU (C) |
25923 |
105.1 (-) |
0.116 |
3.7 X |
| BAIDU (P) |
26238 |
80 (-) |
0.103 |
4.8 X |
| BAIDU (Bull) |
69985 |
73.5 (75.5) |
0.179 |
5.0 X |
| BAIDU (Bull) |
68342 |
68 (70) |
0.220 |
4.1 X |
| ALIBA (C) |
28286 |
159.98 (-) |
0.070 |
9.9 X |
| ALIBA (C) |
28007 |
150 (-) |
0.160 |
4.3 X |
| ALIBA (C) |
13780 |
128.1 (-) |
0.248 |
3.7 X |
| ALIBA (P) |
13581 |
98.94 (-) |
0.047 |
4.0 X |
| ALIBA (P) |
27782 |
82.83 (-) |
0.025 |
5.6 X |
| ALIBA (Bull) |
56255 |
119 (120.5) |
0.205 |
6.8 X |
| ALIBA (Bull) |
55197 |
116.5 (118) |
0.230 |
6.0 X |
| ALIBA (Bear) |
53077 |
153.5 (152) |
0.026 |
10.7 X |
| ALIBA (Bear) |
56252 |
150 (148.5) |
0.020 |
13.8 X |
| APPLE (C) |
10507 |
297 (-) |
0.051 |
12.3 X |
| APPLE (C) |
10551 |
254 (-) |
0.270 |
7.2 X |
| APPLE (P) |
10495 |
218 (-) |
0.098 |
8.3 X |
