BABA(US:BABA) Hua Er Jie Jian Wen·2025-12-02 06:42Core Insights - In 2025, China's internet sector is expected to lead globally with a remarkable return rate of 36.5%, but the real story will unfold in 2026 around artificial intelligence (AI) [1] - The competition in China's AI sector will focus on three main themes: AI cloud infrastructure, AI chatbots, and AI applications [3] Group 1: AI Cloud Infrastructure - Major players like Alibaba and Baidu are heavily investing in AI cloud infrastructure, with Alibaba's capital expenditure reaching approximately 120 billion RMB in the past four quarters and plans to invest 380 billion RMB over the next three years [3] - Alibaba's cloud business revenue grew by 34% year-on-year in Q3 2025, while Baidu's AI cloud revenue also saw a 21% year-on-year increase, reaching 6.2 billion RMB [3] Group 2: AI Chatbot Competition - AI chatbots are identified as the "traffic entry point" for the AI era, with Alibaba, ByteDance, and Tencent competing fiercely for user engagement [7] - ByteDance's chatbot "Doubao" leads the Chinese market with 197 million monthly active users (MAU) as of October 2025 [7] Group 3: Vertical AI Applications - Companies in vertical sectors like Meituan, Ctrip, and Didi are developing proprietary AI agents using their unique data to enhance user engagement and explore new monetization opportunities [11] - Ctrip's AI travel assistant "TripGenie" saw its user base grow by over 200% year-on-year in the first half of 2025 [11] Group 4: Global Expansion of AI Applications - Chinese AI applications are accelerating their global reach, with ByteDance's products ranking among the top in the world; "Dola" and another Chinese product "DeepSeek" have 47 million and 39 million MAU, respectively [14] - Combining the overseas users of Dola with Doubao's domestic users, ByteDance's AI chat products could reach approximately 250 million MAU, placing them third globally [14] Group 5: Performance Review and Future Outlook - In Q3 2025, 27 out of 44 internet companies reported better-than-expected profits, attributed to ongoing cost optimization and productivity gains from AI [18] - The report anticipates that the proliferation of AI tools will enhance consumer efficiency, leading to increased leisure and entertainment spending, particularly benefiting the gaming and tourism sectors [18] - The gaming industry is expected to thrive due to improved development efficiency, with the average revenue per user (ARPU) rebounding to 41 RMB, a 13.3% year-on-year increase [18] - The tourism sector shows resilience, with tourism expenditure as a percentage of GDP at 4.3% in 2024, indicating growth potential as international flight passenger volumes return to pre-pandemic levels [18]