Core Viewpoint - The article discusses the phenomenon of "Becoming Chinese," a cultural trend where non-Chinese individuals in Western countries adopt aspects of Chinese culture, reflecting a shift in consumer sentiment and soft power dynamics [3][5][7]. Group 1: Cultural Adoption - The trend began around mid-2025, with individuals posting videos on platforms like TikTok and Instagram, claiming they are "becoming Chinese" by engaging in activities such as drinking hot water and practicing Tai Chi [3][4]. - This cultural shift has expanded from health practices to lifestyle and fashion, with Chinese brands promoting "Chinese style" to Western consumers [4][5]. Group 2: Social Media Influence - The closure of TikTok in the U.S. led some users to migrate to the Chinese app Xiaohongshu, which saw a significant increase in downloads, indicating a growing interest in Chinese content [6]. - The popularity of YouTube star IShowSpeed's trip to China, which garnered attention from millions, further fueled this cultural curiosity [6]. Group 3: Soft Power Dynamics - The rise of this "Chinese-ness" coincides with the economic decoupling between the U.S. and China, where China is increasingly viewed as a leader in certain sectors, contrasting with the U.S.'s perceived decline [7]. - The article notes the paradox of holding both anti-China and pro-China sentiments in the U.S., suggesting a complex relationship with Chinese culture and identity [7][8].

Summary of China Internet Sector Conference Call Industry Overview - The China Internet sector has had a lackluster start to 2026, with KWEB remaining flat year-to-date. AI advancements continue to influence investor preferences within the sector, particularly with Alibaba outperforming due to its Qwen agentic services, while Tencent has lagged behind [1][2]. Key Companies Discussed Tencent - Tencent's share price reflects investor concerns regarding its AI model and chatbot development. The company has shown solid returns on investment (ROI) from AI in its advertising and gaming sectors, trading at a projected 14-15x PE for 2027, indicating a favorable risk-reward scenario as earnings compound [3][8]. - Recent issues with the Yuanbao Party highlight challenges in AI development within WeChat, which faces higher quality standards compared to other platforms. Despite this, Tencent's advertising business remains robust, with strong growth in Video Accounts and digital ads [3][85]. - The company is perceived to be behind in AI model development, which has negatively impacted its valuation multiples. However, the potential for recovery exists as the company continues to innovate and improve its AI capabilities [57][59]. Alibaba - Alibaba's sentiment peaked during the launch of Qwen agentic services, which positions the company favorably in the domestic market. The use of red packet promotions to stimulate online shopping behavior is seen as a more logical strategy compared to incentivizing information retrieval [4][9]. - Concerns remain regarding Alibaba's ability to demonstrate that its AI initiatives can drive significant growth in gross merchandise volume (GMV) and customer retention. The combination of a top-tier AI model, strong growth in Alicloud revenues (30-40%), and a solid GPU development program makes Alibaba an attractive investment [4][9]. - The regulatory environment remains a concern, with ongoing investigations into other companies in the sector contributing to cautious sentiment among investors [4][55]. AI and Chatbot Wars - The competition among major Chinese internet platforms, including Tencent, Alibaba, Bytedance, and Baidu, has intensified with the introduction of red packet promotions aimed at boosting AI chatbot adoption. This strategy indicates that AI capabilities alone are insufficient for consumer-facing applications [2][19]. - Recent data suggests that while user acquisition for AI chatbots has increased due to promotional efforts, daily engagement metrics have not shown significant improvement, raising questions about long-term user retention and behavior change [17][24]. - The effectiveness of cash incentives in driving user engagement with AI chatbots is debated, with comparisons drawn to past successes in online payment adoption [20][21]. Regulatory Environment - The regulatory landscape for the China Internet sector has shifted, with increased scrutiny and investigations affecting investor sentiment. The potential for stricter enforcement of e-commerce taxes and other regulations has raised concerns about future growth prospects [4][55]. - Despite these challenges, recent stock pullbacks may improve the risk-reward profile for investors in the sector, particularly for Tencent and Alibaba [56]. Investment Implications - Both Tencent and Alibaba present distinct investment opportunities, with Tencent focusing on steady earnings and AI ROI, while Alibaba emphasizes faster model development and long-term AI optionality. The current market environment favors companies that can demonstrate tangible AI success and consumer engagement [7][28]. - The ongoing debate among investors regarding the costs and benefits of AI investments will likely influence stock performance in the near term, with a shift towards favoring companies that can deliver visible earnings impacts [28][100].

Core Insights - Alibaba Group (BABA) is significantly increasing its investment in artificial intelligence, but this aggressive spending is raising concerns about its near-term profitability as evidenced by its recent earnings report [1][7] Financial Performance - The company reported non-GAAP earnings of 61 cents per ADS for Q2 fiscal 2026, missing the Zacks Consensus Estimate by 7.58% [1] - Non-GAAP diluted earnings in domestic currency were RMB 4.36, reflecting a 71% year-over-year decline, despite a 5% increase in revenues to RMB 247.8 billion [1] - Capital expenditures surged 80% year-over-year to RMB 31.9 billion ($4.5 billion), resulting in negative free cash flow of RMB 21.8 billion, a reversal from a RMB 13.7 billion inflow a year ago [2] - Adjusted EBITDA fell 78%, with the margin dropping from 17.4% to 3.7% [2] Investment Strategy - Alibaba is committed to spending at least RMB 380 billion on AI and cloud initiatives over three years, having already invested RMB 120 billion [3] - The company is expanding its AI footprint through various projects, including the open-source RynnBrain robotics model and integrating AI across its platforms [3] Competitive Landscape - Other tech giants are also ramping up their capital expenditures, with Amazon projecting approximately $200 billion for 2026 and Alphabet guiding $175-$185 billion, both focusing on AI and cloud services [4] - Unlike Alibaba, Microsoft and Google are maintaining robust profitability, which provides them with a financial cushion for their investments [4] Stock Performance and Valuation - BABA shares have increased by 29.5% over the past six months, outperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector, which saw declines of 9.1% and 0.7%, respectively [5] - The Zacks Consensus Estimate for fiscal 2026 earnings is $5.96 per share, indicating a 33.85% year-over-year decline [10] - BABA stock is currently trading at a forward 12-month price/sales ratio of 2.42X, compared to the industry's 1.91X, and has a Value Score of F [11]

Core Insights - SGA's Emerging Markets Growth Strategy experienced a divergence from the market in Q4 2025, with the portfolio returning 0.8% (Gross) and 0.6% (Net), compared to MSCI EM Net TR Index return of 4.7% and MSCI EM Growth Net TR Index return of 3.3% [1] - For the full year 2025, the portfolio achieved returns of 23.8% (Gross) and 22.8% (Net), lagging behind the indexes which returned 33.6% and 34.3% respectively [1] - The portfolio anticipates annual revenue growth of 13% and earnings growth of 16% over the next three years [1] Company Focus: Alibaba Group Holding Limited - Alibaba Group Holding Limited (NYSE:BABA) was highlighted as a detractor in Q4 2025 due to mixed fiscal Q2 results, with core commerce facing slowing growth and profit pressure [3] - The company reported a one-month return of -3.87% and a 12-month increase of 37.46%, with a market capitalization of $392.286 billion as of February 11, 2026 [2] - Alibaba's cloud revenue growth accelerated, and management's strategy in quick commerce aims to enhance market share despite initial profit pressures, leveraging its user base and ecosystem assets [3] - Ongoing investments in AI and cloud infrastructure are expected to increase, with a focus on sustaining market share in quick commerce and food delivery services [3] - The company is projected to achieve high-teens earnings growth over the next three years, supported by its scale and innovation in China's digital economy [3]

Core Viewpoint - Alibaba plans to invest 3 billion yuan (approximately $432 million) during the Lunar New Year to promote its Qwen AI app, intensifying competition among China's tech giants in the consumer-facing AI chatbot market [1][2][4]. Group 1: Investment and Marketing Strategy - The spending initiative will commence on February 6 and aims to attract users through incentives related to dining, drinks, entertainment, and leisure, including large red envelope-style rewards [3][6]. - This investment is about three times the amounts announced by competitors Tencent and Baidu, highlighting the aggressive marketing strategies employed by major tech firms during the festive season [4][6]. Group 2: Competitive Landscape - The competition in China's AI sector is intensifying, particularly following the launch of advanced domestic models that have disrupted the market [7]. - Several AI companies are synchronizing product upgrades with the holiday period, with DeepSeek expected to release its next-generation V4 model in mid-February [8]. Group 3: Consumer Behavior Insights - Data indicates that consumers tend to remain loyal to the first AI chatbot they try, which influences companies to utilize familiar growth strategies from payments and eCommerce to drive downloads and habitual use [9].

Core Insights - China's technology giants, including Alibaba and ByteDance, are entering a new phase of the AI race termed 'agentic commerce,' focusing on transforming chatbots into comprehensive shopping and payment tools [1] Group 1: Alibaba's Qwen AI Chatbot Update - Alibaba has updated its Qwen AI chatbot, enabling users to complete transactions directly within the interface, such as ordering food and booking air tickets [2] - The update integrates Qwen with Alibaba's broader e-commerce ecosystem, allowing users to compare tailored product recommendations from platforms like Taobao and Fliggy, and complete payments through Alipay without leaving the chatbot [2][3] - Previously, Qwen could only make recommendations based on user prompts, requiring users to navigate multiple platforms for purchases [3] Group 2: Shift to Agentic AI - The update signifies a broader shift among global AI firms from foundational AI models to "agentic AI," which performs tasks on behalf of users with minimal supervision [3] - The transformation of commercial services through agentic AI enhances user engagement and builds a sustainable competitive advantage, often referred to as a business moat [4] Group 3: E-commerce as a Use Case - E-commerce is emerging as one of the earliest and most widespread applications of agentic AI, with payment and tech giants in the U.S. also launching their initial versions recently [5] - Alibaba is well-positioned to lead in agentic commerce due to its advanced large language model capabilities and extensive e-commerce network covering various sectors such as clothing, food, housing, and transportation [6]

Summary of Alibaba Group Holding Conference Call Company Overview - **Company**: Alibaba Group Holding (BABA.N) - **Industry**: China Internet and Other Services - **Market Cap**: US$403.539 billion - **Current Stock Price**: US$169.90 (as of January 14, 2026) - **Price Target**: US$180.00, indicating a 6% upside potential Key Developments - **Launch of Qwen AI Assistant**: - Qwen AI can perform over 400 daily tasks through integration with the Alibaba ecosystem, providing one-stop solutions [1] - The Qwen App achieved over 100 million monthly active users (MAU) within two months of its launch [1] - Alibaba anticipates that 60-70% of digital-world tasks will be completed by AI in the next two years, with the remaining tasks enhanced by AI for efficiency [1] Market Position and Competition - **Ecosystem Integration**: - Qwen leverages Alibaba's ecosystem, including Taobao, Eleme, Fliggy, Amap, and Alipay, positioning it as an all-in-one AI superapp and life assistant [3] - Competitors like Tencent are enhancing their AI models, although their product launches may lag behind [3] Financial Expectations - **User Growth and Revenue**: - Expected increase in daily active users (DAU) for Qwen and improvements in its capabilities are projected to drive share price growth alongside cloud revenue, estimated to grow by over 35% in F3Q and 40% in F27 [4] - **Marketing Expenses**: - Increased marketing spending for consumer adoption may lead to higher overall losses, estimated at RMB 7 billion in F3Q [4] Risks and Opportunities - **Upside Risks**: - Better monetization in core e-commerce could drive earnings growth [18] - Faster enterprise digitalization may re-accelerate cloud revenue growth [18] - Stronger demand for AI could further boost cloud revenue [18] - **Downside Risks**: - Increased competition and higher-than-expected reinvestment costs [18] - Weaker consumer spending amid a slower post-COVID recovery [18] - Regulatory scrutiny of internet platforms could pose additional challenges [18] Financial Metrics - **Fiscal Year Ending**: March 2025 - **Revenue Estimates**: - FY 2025: RMB 996 billion - FY 2026: RMB 1,022 billion - FY 2027: RMB 1,111 billion - FY 2028: RMB 1,202 billion [8] - **Net Income Estimates**: - FY 2025: RMB 129 billion - FY 2026: RMB 111 billion - FY 2027: RMB 106 billion - FY 2028: RMB 141 billion [8] Conclusion - Alibaba Group Holding is positioned to capitalize on the growing AI market through its Qwen AI Assistant, which integrates seamlessly into its extensive ecosystem. While there are significant growth opportunities, the company must navigate competitive pressures and regulatory challenges to achieve its financial targets.

Core Insights - Alibaba has enhanced its Qwen App with agentic and payment capabilities, allowing users to perform various tasks through voice or text requests [1][2][5] Group 1: New Features and Capabilities - Qwen App can now order food, complete in-chat payments, book travel, and call restaurants, all initiated by a single user request [2] - The app integrates with Alibaba's ecosystem, including Taobao, Taobao Instant Commerce, Alipay, Fliggy, and Amap, to facilitate these features [3] - Through Taobao Instant Commerce, users can place orders, apply promotions, and complete payments, while Fliggy allows for travel itinerary design and bookings [4] Group 2: AI Payment Integration - A direct integration with Alipay enables native AI payment, allowing transactions to be completed within the conversation upon user confirmation [5] - This AI payment capability is currently available for Taobao Instant Commerce and will be expanded to other services in the future [5] Group 3: Strategic Vision and User Growth - Alibaba aims to create an intelligent assistant through Qwen App, reducing repetitive tasks for users and enhancing everyday utility [6] - The app achieved 100 million monthly active users within its first two months of release [6] Group 4: Investment in AI - Alibaba has invested over $14 billion in AI infrastructure and research in the past year and plans to allocate $53.42 billion over the next three years for AI and cloud infrastructure [7]

Core Insights - Alibaba has launched significant upgrades to its Qwen AI app, enabling users to order food and book travel within the app, marking a strategic shift towards consumer-facing AI [1][2] Group 1: Upgrade Features - The new features allow users to complete tasks entirely within the AI chat interface, eliminating the need to switch between applications [1] - The upgrade integrates core Alibaba services such as Taobao, Alipay, Fliggy, and Amap into a unified AI interface, facilitating seamless transactions [4] - A new "Task Assistant" feature in beta can make real phone calls, process up to 100 documents simultaneously, and plan multi-stop travel itineraries [5] Group 2: Market Position and Strategy - This upgrade follows a previous major enhancement to the Qwen app, indicating Alibaba's strategic pivot into consumer-facing AI, an area where it has previously lagged behind competitors like ByteDance and Tencent [2] - The Qwen app has surpassed 100 million monthly active users within two months of its public beta launch, reflecting strong consumer interest [5] - The expansion of the Qwen app is part of a broader competition in China's AI sector, where companies are striving to translate advanced language models into practical applications [6]

Summary of Key Takeaways from China Internet Tour Industry Overview - **Industry**: China Internet - **Key Focus Areas**: AI, Cloud, Macro Environment, Competition, Regulation Core Insights 1. **Ecommerce Growth**: Soft consumption sentiment has negatively impacted ecommerce growth in the second half of Q4 2025, with expectations of continued muted macro conditions into 2026 [1][14] 2. **Regulatory Impact**: Tightening regulations and the implementation of ecommerce VAT are expected to affect the profitability of smaller merchants, which will, in turn, weigh on ecommerce platform monetization and margins [1][15] 3. **AI Cloud Demand**: Demand for AI cloud services remains robust, although supply constraints may gradually ease due to advancements in domestic chip production and selective approvals of high-end foreign chips [1][14] 4. **Competitive Landscape**: The competition in food delivery, quick commerce, and AI chatbots is intense, with increased promotional spending likely to further pressure profitability and margins [1][14] 5. **International Expansion**: Companies are increasingly focusing on overseas markets for robotaxi services, AI applications, and IDC buildout, moving beyond previous focuses on gaming and cross-border commerce [1] Company-Specific Highlights Alibaba (BABA) 1. **GMV Growth Pressure**: Macro conditions and a high base have pressured GMV growth, alongside a lapse of 0.6% fee/QZT benefit [2] 2. **Strategic Investments**: Management reiterated commitment to strategic investments in food delivery and quick commerce, aiming to increase volume and GMV market share in 2026 [2] 3. **Cloud Revenue Growth**: Strong demand for cloud infrastructure is expected to sustain high growth levels with stable margins [2] 4. **AI Integration**: Progress in user penetration of Qwen-Max-3 and future integration with Taobao and other Alibaba ecosystem components were highlighted [2] JD.com (JD) 1. **Macro Softness**: Similar to Alibaba, JD management noted macro softness and a high base affecting trade-in programs, with expectations of recovery in 2026 [3] 2. **Food Delivery Investment**: Continued investment in food delivery is seen as crucial for user growth and cross-selling synergies [3] 3. **General Merchandise Demand**: Despite macro challenges, demand for general merchandise remains solid, with growth momentum expected to continue into 2026 [3] Baidu 1. **AI and Cloud Demand**: Management emphasized strong demand for AI and cloud services, with AI-related revenues accounting for 40% of total core revenues in Q3 2025 [7] 2. **Spin-off Plans**: Commitment to improving disclosure of AI-related metrics and enhancing shareholder returns through the proposed spin-off of Kunlunxin was reiterated [7] Didi 1. **Volume Growth**: Management expects to maintain over 8% volume growth in China for 2026 despite macro headwinds [8] 2. **International Expansion**: Didi is committed to becoming a sustainable second player in Brazil, with significant investments in food delivery [8] Trip.com (TCOM) 1. **Travel Booking Performance**: Travel booking volume remained decent during New Year 2026, with expectations for hotel ADR stabilization [9] Full Truck Alliance (YMM) 1. **Order Volume Growth**: Anticipated slowdown in order volume growth to 12% in Q4 2025, with recovery expected in 2026 [10] Kanzhun 1. **Recruitment Recovery**: Continued recovery in recruitment sentiment, particularly in sectors like internet and healthcare, with growth momentum expected to sustain into 2026 [12] Bilibili (BILI) 1. **Ad Performance**: Advertising performance is on track, with expectations for decent momentum into 2026 driven by performance ads [13] Additional Insights 1. **Ecommerce VAT Impact**: JD.com is expected to be least affected by ecommerce VAT due to its large proportion of sales from 1P and large brands, while PDD and Kuaishou may face greater challenges [15] 2. **Investment Commitments**: Both Alibaba and JD are committed to high levels of investment spending, which may pressure profitability in 2026 [15] 3. **AI Competition**: The competition in AI infrastructure and models is intensifying, with Baidu's neutral position and Kunlun's compatibility with CUDA seen as advantages [14][15] Conclusion - The China internet sector is facing challenges from macroeconomic conditions and regulatory changes, but there are opportunities in AI and cloud services. Companies are focusing on strategic investments and international expansion to navigate these challenges and drive growth into 2026 [14]