JP Morgan expects the Infrastructure as a Service (IAAS) value chain to continue to perform well and recommends Alibaba (09988) and KUAISHOU-W (01024).

JPMorgan has released a research report stating that they have established a framework for the development of Generative Artificial Intelligence (Gen AI) in China, consisting of four stages, and have formulated investment strategies for each stage. They believe that the development of Gen AI will have a multi-year impact on the fundamentals and stock prices of companies within their coverage range. They expect the Infrastructure as a Service (IAAS) value chain to continue to perform well, mainly due to the beginning of the second stage of development of Gen AI in China, which will be accompanied by rapid growth in computing power. Additionally, high-potential beneficiaries of Gen AI applications may also perform well, despite high uncertainty and risks, and they recommend investing in BABA-W (09988) and KUAISHOU-W (01024). JPMorgan predicts that the development of Gen AI in China will go through a series of clearly defined stages, each accompanied by significant market dynamics. Therefore, they advise investors to focus on the IAAS value chain in the second stage, expecting the rapid proliferation of Gen AI functionalities in this stage. In the third stage, they suggest shifting investments towards Gen AI application beneficiaries once they start realizing financial benefits from the adoption of Gen AI. In the fourth stage, they anticipate the emergence of native Gen AI killer applications that will surpass their peers. JPMorgan expects the IAAS value chain to continue to perform well in the next 6 to 12 months, mainly benefiting from positive revenue forecasts. Alibaba is the firm's favored stock in the IAAS value chain. They also point out that the development of Gen AI bears some similarities to the transition from PC internet to mobile internet, and they believe that the development of Gen AI will drive consumption and revenue growth in the public cloud sector. They anticipate significant changes as Gen AI-native applications disrupt traditional business models, impacting market leaders positively and negatively. The sustainability of Gen AI transactions will depend on whether the positive revisions to financial estimates due to Gen AI adoption can be sustained.