Zhi Tong Cai Jing·2026-01-06 03:13Core Insights - The report from Citigroup highlights three major themes for the Chinese internet industry in 2026: growth in recurring revenue from cloud infrastructure, model stacks, and the use of inference tokens; competition among major internet companies for user traffic in AI chatbots for future ecosystem monetization; and vertical companies deploying proprietary AI agents trained on self-collected data to maintain competitive advantages and enhance user engagement and monetization potential [1] Group 1: Industry Trends - The majority of internet companies are expected to improve operational leverage through AI-assisted cost optimization, with some companies likely to accelerate revenue growth due to effective deployment of AI agents [1] - The rapid adoption of AI assistant tools is anticipated to enhance consumer work and life efficiency, allowing more time for leisure activities [1] Group 2: Market Opportunities - Continued demand in tourism and online gaming is expected to support stable revenue growth for online travel and gaming companies, providing good diversification for investment portfolios to offset the higher risks associated with AI hype [1] Group 3: Company Recommendations - Citigroup favors Tencent Holdings (00700) and Alibaba-W (09988) as core AI investment concepts within the Chinese internet sector, maintaining a "Buy" rating for Tencent with a target price of HKD 751, citing strong AI development prospects in enterprise and user applications [1] - For Alibaba, Citigroup also assigns a "Buy" rating with a target price of HKD 223, optimistic about its performance in cloud revenue growth and efficiency improvements [1]