Bernstein lifts China internet stock targets on AI momentum

Investing.com -- Bernstein has raised price targets on major China internet stocks, citing AI momentum as a key driver of valuation gains.

The investment bank has lifted its Tencent Holdings Ltd (HK:0700) price target to HK$640 and raised its Alibaba (NYSE:BABA) target to $165, highlighting them as primary beneficiaries of China’s AI push.

Tencent remains Bernstein’s top AI pick, with its integration of DeepSeek gaining traction across its ecosystem. The firm noted that Tencent’s AI assistant Yuanbao is now being downloaded at a faster rate than Bytedance’s Doubao and the DeepSeek app.

"Yuanbao downloads inflected shortly after the DeepSeek integration announcement, overtaking Doubao… then more recently DeepSeek too," the analysts led by Robin Zhu wrote.

Tencent’s AI monetization strategy is expected to support its advertising and gaming businesses, with its cloud division also poised for some gains. However, Bernstein pointed out that "selling GPU compute ranks lower on management’s list of priorities."

Alibaba’s AI strategy is also drawing renewed interest from global investors, particularly in relation to its cloud unit.

"The volume of inbounds from global investors ‘taking another look at China’ has been very notable," Bernstein noted. The firm sees AI-related revenues contributing to Alicloud’s growth but flagged concerns over data center overcapacity.

It noted that while there is debate over AI margins, DeepSeek’s disclosure "pointed to high margins on selling API calls."

Beyond Tencent and Alibaba, Bernstein views AI as a broader catalyst for China’s internet sector. The analysts suggested that the country’s rapid adoption of AI applications, fueled by a highly engaged digital consumer base, could accelerate monetization opportunities.

They also highlighted a potential boost to industry sentiment and investment. "We’ve wondered if the recent excitement around AI will represent a catalyst for improved morale and entrepreneurial spirit in China’s tech sector,” Zhu and his team continued.

Furthermore, the analysts hiked their price target for NetEase (NASDAQ:NTES) to $125, citing strong performance from Marvel Rivals and the upcoming release of Ananta. However, the analysts cautioned that the company’s recent game launches, including Fragpunk and Destiny Rising, appear "somewhat experimental in nature."

Bilibili (NASDAQ:BILI), meanwhile, stands to benefit from AI-driven ad improvements but remains a more speculative bet. The firm maintained its $18 target, noting that "even a sector-high forward multiple of 2026 earnings only implies modest upside."