LIVE MARKETS-Baidu, Alibaba lead charge as Beijing’s AI push wins over investors

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BAIDU, ALIBABA LEAD CHARGE AS BEIJING’S AI PUSH WINS OVER INVESTORS

Alibaba’s BABA.N partnership with Nvidia NVDA.O and its plans to expand its global data centers sent its shares soaring on Wednesday, sharpening investor focus on China’s AI ambitions.

“Alibaba is showing that big AI spending is not restricted to the West,” said AJ Bell investment director Russ Mould. “Having previously flagged a $53 billion target for AI-related investments, chief executive Eddie Wu has now suggested spending will climb even further. Expect to see expansion across both services and infrastructure - a sign that Alibaba is determined to be a frontrunner in the technology.”

Alibaba and Baidu BIDU.O remain the two main Chinese AI plays available to U.S. investors, noted Matthew Tuttle, CEO of Tuttle Capital Management. Alibaba ADRs were last up nearly 9% in premarket trade, on pace to extend their September gains of 20.1%. Baidu ADRs have climbed about 32% this month, buoyed by progress in its AI reasoning model. It also operates Ernie Bot, billed as China’s first rival to OpenAI’s ChatGPT.

“We continue to see China’s tech sector as the best way to position in the Chinese market,” UBS strategists said in a note. “The medium-term earnings outlook is attractive, and we don’t think valuations fully reflect a compound annual growth rate of 20–25%. The sector also offers exposure to AI and other transformational areas, such as robotics and biotech.”

Both Alibaba and Baidu have also begun using in-house chips to train their AI models, partly replacing Nvidia’s products, according to a report earlier this month.

Optimism over Beijing’s artificial intelligence progress and fresh signals of a possible U.S. deal on TikTok have boosted demand for Chinese risk assets in recent days.

The iShares China Largecap ETF FXI.P, which hit a near four-year high last week, rose 1.6% in trading before the bell on Wednesday.

(Medha Singh)

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