2025-07-16 15:25Investment Rating - The industry investment rating is "Attractive" [6]. Core Insights - The resumption of H20 chip sales to China is viewed as a positive catalyst for BAT (Baidu, Alibaba, Tencent) as it is expected to accelerate hyperscalers' capital expenditures in the second half of the year, driven by cloud growth [3][6]. - Tencent is highlighted as the top pick in the industry due to its strong revenue and earnings growth, particularly in AI applications and adtech upgrades [4][5]. - Alibaba is recognized as the best AI enabler, with expectations of cloud revenue growth accelerating to 22% in Q2 compared to 18% in Q1 [5]. Summary by Sections Industry Overview - The report indicates that China's AI adoption is increasing, evidenced by an 18% growth in Alicloud in Q1, with expectations for further acceleration in the coming quarters [3]. Company Specifics - Tencent has announced a capital expenditure of approximately Rmb95 billion for fiscal year 2025, while Alibaba plans to invest Rmb380 billion over the next three years [3]. - The report emphasizes Tencent's early monetization through AI adtech upgrades, which have shown consistent double-digit growth in advertising revenue [4]. - Alibaba's current share price does not reflect the value of its cloud business, which is expected to be a significant growth driver [5]. Stock Preferences - Tencent is preferred due to its robust growth in consumer-facing AI applications and limited competition risks [4]. - Alibaba is positioned well to capture rising AI demand through its cloud services, despite recent market focus shifting towards food delivery and quick commerce [5].