Investors are increasingly looking to artificial intelligence (AI) stocks as a way to capitalize on the growth of this seemingly novel technology. While OpenAI, Microsoft and Google have been hogging the headlines, astute investors are also aware that China is keeping in pace with AI developments.
With plans to become a world leader in AI by 2030, the country has dedicated resources to the development of artificial intelligence expertise, setting up AI research departments in local universities and increasing the number of related degree programs since 2018. In 2020, China filed the most AI related patents and the number of AI startups in China also grew to over 1,100 companies.
If you’re looking for exposure to China’s AI industry, look no further.
We round up seven Top Chinese AI companies that you should consider if you want exposure to this burgeoning sector. These companies represent some of the most promising opportunities for those looking to invest in an industry with enormous potential. (p.s. if you are not comfortable betting on individual China AI stocks, explore these AI ETFs instead)
Best China AI Stocks
BAT: China’s Big Tech involvement in AI
Hoping on the AI-chatbot hype, all three Chinese big tech companies have announced that they are working and testing on their own ChatGPT-like service.
1) Baidu (9888.HK / NASDAQ:BIDU)
Baidu is China’s most popular search engine, claiming over 75% market share. Like Google, ‘Baidu’ is a verb used to refer to the act of searching up something online.
While it lead the tech race alongside Alibaba and Tencent in the early days, Baidu seemed to have fallen off the radar in recent years. Instead of resting on their laurels, they had been developing their AI capabilities stealthily since 2010.
Search engine aside, Baidu is now also known for its work in areas such as autonomous driving, natural language processing, and computer vision.
ERNIE Bot: Baidu’s ChatGPT rival
Baidu recently announced that it is currently beta testing its ChatGPT rival chatbot, ERNIE bot (文心一言), and that it would be integrated into Baidu’s search engine soon. At the point of writing, Baidu hasn’t provided an official launch date, although it has estimated that internal testing of the ERNIE bot would be completed in March 2023.
Baidu had introduced ERNIE (Enhanced representation through knowledge integration), a pre-training language model, back in 2019.
AI chatbot aside, ERNIE has been used to improve the performance of Baidu Brain, the company’s core AI engine.
Here’s how else Baidu employs and develop AI across its business:
Baidu Core – AI Cloud
Powered by Baidu Brain, Baidu Core’s AI Cloud service is the company’s enterprise cloud service that offers customizable AI cloud solutions for businesses. Revenue from Baidu Core has been growing. Baidu had reported a 64% growth in 2021 and a 2% year-on-year growth as of 3Q22.
Baidu Apollo
Apollo is Baidu’s intelligent driving technology. It has received the go ahead for fully autonomous driving tests in Beijing and several other cities in China in 2021.
Baidu provides automakers with services such as Apollo’s navigation technology and automated valet parking systems.
Apollo Go, Baidu’s driverless robotaxi services is also live in 8 cities across China, including Beijing and Shanghai as of Aug 2022:
According to its 3Q22 earnings report, Apollo Go has provided a total of 1.4 million rides to the public as of third quarter 2022.
Sidenote: the Chinese government had appointed “national AI champions” in its efforts to becoming the world leader in AI. As part of this regime, Baidu had been appointed to lead developments in autonomous driving.
iQiyi
Touted as “China’s Netflix”, iQiyi is an online video platform that also produces its own premium content. iQiyi relies on AI-based big data analytics capabilities to optimize its content procurement and production. iQiyi has had to put up with intense competition in recent quarters, seeing a 2% y-o-y decrease in revenue as of 3Q22.
2) Alibaba (9988.HK / NYSE:BABA)
Alibaba needs no introduction. As of 9 Feb 23, it had also announced that it is beta-testing its own ChatGPT-like AI chatbot, via its research institute, Damo Academy.
Alibaba is also one of China’s leading AI company, having been appointed as the lead to building smart cities and IoT technology by the Chinese government.
Here’s how it uses AI in its business:
Alibaba Cloud’s AI capabilities
Alibaba Cloud offers AI driven data analytic solutions and machine learning capabilities to enterprise clients, to help them to better understand their business data and make better decisions.
Alibaba’s AI also powers its product recommendation system to drive sales. And, is also used to regulate computation load and boost product sales during high volume events such as its Double 11 sales.
Cainiao Smart Warehouse Solution
As the largest e-commerce business in China, warehouse and logistic management is a key process in Alibaba’s business. Cainiao is Alibaba’s logistics arm. It uses AI to automate and optimize the supply chain.
DAMO Academy
DAMO academy is Alibaba’s research institute focusing on AI development across data intelligence, IoT, human-machine interaction, and quantum computing.
3) Tencent (0700.HK)
Like Alibaba, investors should be familiar with Tencent.
Tencent has been developing its AI capabilities through the years via its Tencent AI Lab. In 2018 it had introduced Effidit (Efficient and Intelligent Editing), its digital writing assistant powered by neural language models. Tencent has also announced that it is building its own AI powered chatbot.
That aside, Tencent has been closely involved in China’s AI development, having been appointed to lead A.I. innovation in computer vision for medical imaging.
Here’s how Tencent uses AI in its business:
Improve user experience
Tencent relies on AI to provide better personalized recommendations and engaging interaction across its platforms.
Gaming AI
Tencent has a significant presence in the gaming industry and has applied AI to its game development, optimization and testing processes, as well as its game recommendation systems.
Healthcare AI
Tencent has also developed AI technology used in the healthcare sector, with a focus on early detection (eg. medical image analysis and disease diagnosis), disease prevention and drug discovery.
Fintech AI
Tencent’s WeChat Pay is the 2nd biggest digital wallet in China, hence it is no surprise that Tencent would develop AI technology to improve its service for users. Tencent has developed Fintech AI to improve processes like credit risk assessment and fraud detection.
Tencent also states that it is developing AI technologies that can help to enhance processes in the following industries:
- Agriculture: to help farmers grow more food using fewer resources
- Industrial: to assist companies to upgrade their capabilities through AI
- Manufacturing: to help businesses optimize their infrastructure and operations
More China AI Companies to watch
BAT are not the only companies to watch, here’re smaller China tech stocks leading the country’s AI development:
4) iFlyTek (SHE: 002230)
iFlyTek is a Chinese artificial intelligence (AI) technology company that builds smart assistances, speech recognition tools and natural language processing solutions.
Founded in 1999, the company has quickly grown to become one of the leading AI companies in China, in the field of AI driven language processing technologies. It was listed on the Shenzhen Stock Exchange in 2008.
On top of providing its technology to partners, it also offers:
- iFlyTek Input app that allows users to dictate input onto any app on their phones.
- Yudian, a virtual assistant that provides accurate real-time translation of 23 Chinese dialects and 4 foreign languages.
- The Translator, an instant translation device that works offline, and for major world languages.
- Flying Fish, a virtual assistant for drivers
- Alpha Egg, a dictionary and translator pen designed mostly for children
- and many other services.
5) SenseTime (0020.HK)
SenseTime is a Chinese AI company that develops facial recognition, image recognition, autonomous driving and other related technologies powered by AI.
Founded in 2014, the company has since become one of China’s leading providers of AI powered vision technology.
Sensetime’s SenseCore AI can be integrated into a wide range of use cases from self driving cars to facial recognition and more.
Sensetime went public in December 2021 and trades on the Hong Kong Stock Exchange. We covered SenseTime’s IPO and analysed it business here previously:
6) Cloudwalk Technology (SHA: 688327)
Cloudwalk is another China AI company focusing on facial recognition. Its technology has been used in the finance, public security and aviation sectors.
Although Cloudwalk Technology is recognised as one of “China’s four Artificial Intelligence dragons”, it is currently only listed on the Shanghai stock exchange which has trading limitations for foreigners.
7) Cambricon (SHA:688256)
Cambricon builds processor chips that support AI technology and has been recognised as one of China’s most valuable AI chip company.
Unlike the rest of the China AI stocks listed above, Cambrion doesn’t develop its own AI technology. Instead, it provides enabling technology that will power the industry.
Artificial Intelligence requires a high processing load – AlphaGo, the AI program that won against top Go player, Lee Sedol, is said to rely on 2000 central processing units (CPUs) and 300 graphics processing units (GPUs).
As of 2019, Cambricon’s chips are said to be used in nearly 100M smartphones and servers. In 2022, Cambricon has also disclosed that it is developing autonomous driving chips. It also has one of the largest patent portfolios in the AI chip space.
Like Cloudwalk, Cambricon is listed on the Shanghai Stock Exchange, you may not be able to invest in it directly as a foreign investor.
Risks of investing in China’s AI stocks
While AI stocks have been doing well recently due to the hype, you should be comfortable with the following risks if you choose to invest in China AI stocks.
1) Influence of China’s policies and state media on its stocks
China’s AI stocks soared alongside the AI hype generated by ChatGPT’s popularity, with stocks like Cloudwalk soaring 105%.
These Chinese AI stocks stumbled subsequently upon its state media’s warning of the AI hype.
We’ve also seen how China stock prices fell due to regulations imposed by their regulators.
As a China stock investor, you’ll have to be comfortable with this phenomenon.
2) Geopolitical Risks
The tension between US and China will continue to pose a risk to China stocks in general.
China’s AI stocks are still worth watching
While the world’s attention has been captivated by ChatGPT and the resulting AI war between Microsoft and Google, the Chinese AI sector continues to grow rapidly. With a collective focus to becoming the world leader in AI, Artificial Intelligence in China will definitely be a sector to watch in the coming years.
We have listed 7 top China AI stocks that you should keep and eye on as they lead the development of China’s AI technology.
If you’re looking for more China AI stock ideas, the Global X China Robotics and AI ETF has 24 holdings at the point of writing for you to research deeper into.
