美股IPO·2025-10-29 10:19Core Viewpoint - Bank of America Merrill Lynch believes that Chinese internet giants are in the "best position" for AI application and commercialization, despite a more than 50% increase year-to-date, the sector's valuation remains at a "non-demanding level" [1][3] AI and Gaming Sector - The report emphasizes unique investment opportunities in AI and gaming within the Chinese internet sector, with a forward P/E ratio of only 17 times, indicating a non-demanding valuation [3] - Analysts strongly recommend embracing AI applications and online gaming while remaining cautious about e-commerce platforms, particularly those affected by instant retail competition [3][4] Company Preferences - Tencent is highlighted as the top pick in the sector due to its combination of AI-driven growth, stable competitive landscape, top-tier shareholder returns, and attractive valuation [5] - Alibaba is viewed favorably in the AI and cloud business sector, being the best representative for investing in China's AI theme due to its leading market share and full-stack AI/cloud products [8][9] E-commerce Sector Challenges - The report adopts a cautious stance on trading platforms (e-commerce and local services), describing the competition in instant retail as a "protracted war" expected to last until 2026, which will lower industry profit margins [10][12] - Due to intensified competition, the total operating profit growth rate in the e-commerce sector has sharply declined from a 2% year-on-year increase in Q1 2025 to a 23% year-on-year decrease in Q2 2025 [12] Valuation Insights - Despite challenges, the overall valuation discount of the Chinese internet sector remains significant, with the Nasdaq Golden Dragon China Index trading at 16 times forward 12-month P/E, compared to 28 times for the Nasdaq 100 Index [15][18] - Historical comparisons show that the valuation premium of Chinese internet stocks relative to the MSCI China Index is currently only 20%, down from 40-80% over the past decade, despite being major beneficiaries of AI-driven productivity improvements [18][20]