CLSA: Rise of Agentic AI in China, Top Picks TENCENT (00700) and BABA-W (09988)

CLSA released a research report stating that Agentic AI is moving from experimentation into enterprise workflows, becoming a new-generation infrastructure layer. Chinese AI models are rapidly narrowing the performance gap and capturing global share through cost efficiency; the bank assigns a "High Conviction Outperform" rating to TENCENT (00700), an "Outperform" rating to BABA-W (09988), and also an "Outperform" rating to Z.AI (02513). The report noted that enterprises are shifting from purely pursuing model capabilities to balancing performance, cost, and deployment flexibility. Multi-model adoption will become a future trend, and it is expected that hyperscale cloud players across chips, models, computing power, and application layers will capture the largest opportunities. CLSA expects the surge in AI applications to ignite the next global cloud supercycle, with the global public cloud market doubling to US$2.3 trillion by 2028, bringing more than US$1 trillion in annual revenue opportunities. In the market, it is more bullish on full-stack cloud and AI providers, as their combination of in-house chips, models, cloud infrastructure, development tools, and applications can form a strong moat. It expects software, video streaming, in-store services, recruitment, and online travel sectors to be more vulnerable, with Tencent and Alibaba as top picks.