Tencent and Alibaba Earnings Reports Land, Stock Prices Plummet—Is AI Transformation Being Emotionally Mispriced?

Tencent and Alibaba have successively experienced post-earnings declines, also dragging down the Hang Seng Tech ETF (513180) and Hang Seng Internet ETF (513330). On March 20, the Hang Seng Internet ETF (513330) gapped down, with intraday adjustments exceeding -2%.

Industry analysts say that the current sell-off sentiment among Hong Kong internet giants is influenced not only by geopolitical risks and liquidity tightening caused by a strong US dollar but also by the reflection of the US stock technology sector’s punishment for “excessive capital expenditure.” In fact, the valuations of the Hang Seng Tech and Hang Seng Internet indices are significantly discounted compared to the Nasdaq (20x vs. 32x), and there is no similar high valuation realization pressure as in US stocks. The AI capital expenditure scale of Hong Kong internet giants is still in the early expansion stage compared to US giants, with relatively ample cash flow and no short-term financing pressure. Additionally, some leading Hong Kong internet stocks, such as JD.com and Meituan, are already near two-year lows, and even based on pure consumer stock valuation, the current level appears overly pessimistic.

Contrary to the pessimistic market sentiment, Wall Street investment banks generally remain optimistic about Chinese tech giants’ AI transformation. JPMorgan believes, “They are expected to overcome short-term profit pressures and see valuation upgrades as the ‘cloud + generative AI’ monetization inflection point becomes clearer.” Goldman Sachs also highlights the “unique full-stack AI capabilities” of Chinese internet giants, citing their financial reports: “Pingtouge chips have shipped over 470,000 units, with annualized revenue reaching 10 billion RMB, and 60% of the chips are used by external clients.”

In terms of investment tools, focus on the largest undervalued opportunities in the Hang Seng Tech and Hang Seng Internet index ETFs: Hang Seng Tech ETF (513180.SH) and Hang Seng Internet ETF (513330.SH), both listed on A-shares and supporting T+0 trading. The Hang Seng Internet ETF (513330.SH) covers leading internet media, software, and service stocks such as Tencent Holdings, Alibaba, Baidu, Xiaomi Group, NetEase, JD.com, and Meituan, with nearly 40% combined weight of BAT, indicating a relatively concentrated allocation. Investors without securities accounts can also participate through off-market connection funds: Huaxia Hang Seng Internet ETF Connect (A: 013171, C: 013172).

Daily Economic News

(Editor: He Chong)

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