Overview
Citi’s latest sector analysis singles out five Chinese internet companies—Tencent, Alibaba, Meituan, PDD and Meitu—as its top picks, arguing that artificial‑intelligence (AI) monetisation and cloud computing are the primary differentiators of winners in a landscape still weighed down by weaker advertising spend and a slowdown in e‑commerce.
Tencent Holdings
Citi notes that Tencent’s AI investments are now translating into measurable business performance rather than merely expense. Accordingly, the bank has lifted its capital‑expenditure outlook to roughly RMB 200.7 billion for the current year and RMB 235 billion for the following year, interpreting the higher spend as confidence in the firm’s AI trajectory rather than a margin‑erosion risk. The company is also reported to be negotiating the acquisition of mobile‑gaming studio SuperPlay for up to US$1.5 billion and has subscribed to $200 million of Bilibili’s recent convertible senior‑note issuance.
Alibaba Group Holding Ltd
Citi’s thematic case for Alibaba now centres on its Cloud Intelligence Group, which posted a 26 % year‑over‑year revenue increase in the fiscal first quarter, with management indicating that the growth rate should be sustainable. This cloud‑driven narrative provides a company‑specific growth story that is relatively insulated from the broader advertising and e‑commerce softness that Citi expects to affect the sector in the second half of the year. In July, Alibaba agreed to a $600 million settlement with the U.S. Department of Justice to resolve allegations that the platform failed to prevent illegal drug sales. The article also mentions that founder Jack Ma and chairman Joe Tsai have recently purchased additional shares in the company.
Meituan
After three consecutive loss‑making quarters, Meituan’s core local‑commerce business returned to profitability in the second quarter, which Citi interprets as a sign that the most damaging phase of the food‑delivery subsidy war may be over. The company has also received rating upgrades from both JPMorgan and Macquarie, with the upgrades attributed to the improved profitability of its food‑delivery arm and a perceived easing of competitive pressures.
PDD Holdings Ltd
Citi highlights Temu’s continued gross‑merchandise‑volume (GMV) expansion, bolstered by effective domestic‑consumption‑stimulus coupon activity during the seasonal promotional period. The firm believes Temu’s momentum should offset an anticipated slowdown in Duoduo Grocery heading into the third quarter, while online‑marketing revenue keeps rising as advertisers shift spend onto PDD’s domestic platform. PDD reported second‑quarter results that beat earnings‑per‑share expectations, although revenue fell slightly short of forecasts. Following the release, analysts including BofA Securities and Benchmark adjusted their price targets on the stock.
Meitu
Citi’s thesis for Meitu is a pure AI‑monetisation play. The company’s AI‑generated content and image‑editing tools constitute an open‑platform monetisation model that Citi expects to be a key swing factor for the second half of the year, largely free from the advertising, e‑commerce, or local‑services headwinds that are affecting larger platforms.
Sector Themes
Across the sector, Citi underscores AI monetisation and cloud computing as the dominant growth levers separating winners from laggards, while noting that broader headwinds from advertising spend and e‑commerce softness remain pervasive.