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Investing.com - Bernstein analyst Robin Zhu has highlighted China’s potential as a key hub for next-generation AI applications despite ongoing challenges around advanced compute supply, according to a recent research report. The Chinese tech sector continues to show resilience, with major players like JD.com maintaining strong financial health scores according to InvestingPro data, which rates the company’s overall financial health as "GOOD."
The analyst notes that China represents "one of the most interesting markets for AI application development" with its base of over one billion internet users creating a "ready-made flywheel" for generating new data and iterating model performance. Zhu points out that many leading Chinese AI models remain open source and offer lower token costs compared to global competitors. This market dynamic has helped Chinese tech companies maintain strong growth trajectories, with JD.com posting revenue growth of over 14% in the last twelve months. For deeper insights into Chinese tech companies’ valuations and growth metrics, InvestingPro subscribers can access comprehensive financial health scores and detailed analysis reports.
Bernstein’s report identifies Tencent and Alibaba as major beneficiaries of AI development in China. Tencent is seeing strong advertising growth partly driven by AI improvements, while Alibaba’s Qwen family of models "ranks amongst the world’s most competitive suites of open source models," according to the research. The competitive landscape extends to other major players like JD.com, which maintains a strong market position with a market capitalization of over $50 billion and robust profitability metrics.
The firm suggests AI could transform China’s cloud computing landscape from an "unattractive business" featuring extensive customization and price competition into a more favorable industry structure. AI shifts motivation for adoption "from cost savings to revenue generation and disruption risk," with GPU rental remaining "a seller’s market."
Bernstein expects "a plethora of vertical AI applications to emerge in China over time," with the research generally favoring instances where "AI is a means to differentiated business ends, supported by proprietary data generation engines, rather than where the AI output is an end all to itself."
In other recent news, JD.com is in discussions with banks to secure a euro-denominated loan to fund its planned acquisition of the German electronics retailer Ceconomy. HSBC Holdings and Standard Chartered have been appointed as lead arrangers for this loan. Additionally, JD.com’s property investment arm is reportedly planning to launch a Singapore-based real estate investment trust (REIT) valued at over $1 billion, in partnership with Partners Group and EZA Hill Property. The REIT could potentially be listed on the Singapore Exchange next year.
On the analyst front, several firms have adjusted their price targets for JD.com. Susquehanna lowered its price target to $32 due to margin pressure, despite recognizing JD.com’s strong growth in the second quarter. CFRA also trimmed its price target to $36, citing increased spending in the company’s expanding food delivery business. Mizuho reduced its price target to $40, though it maintained an Outperform rating, highlighting revenue acceleration and margin expansion in JD.com’s core retail business. These developments reflect ongoing strategic moves and financial evaluations surrounding JD.com.
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