JP Morgan: The rise of AI and DeepSeek boosts the potential of the three major telecommunications companies. China Telecom Corporation (00728) is the preferred choice.

J.P. Morgan released a research report stating that the stock prices of Chinese telecommunication operators are expected to outperform the Hang Seng Index from 2019 to 2024, with a double-digit difference, and their performance so far this year has been better than the market. The bank pointed out that the top three telecom operators not only provide attractive dividend yields but are also growth companies with AI growth potential. J.P. Morgan believes that benign competition, improved return on investment, and capital expenditure optimization should drive the industry's compound annual profit growth rate to 5% from 2026 to 2027. China Telecom Corporation has significant exposure to enterprise digitalization, with growth in this area far exceeding traditional telecommunications services. The bank believes that the rise of AI and DeepSeek in China may drive a reacceleration of revenue in cloud computing and artificial intelligence data centers, further boosting valuation. It is expected that China Mobile Limited (00941), China United Network Communications (00762), and China Telecom Corporation (00728) could see potential price increases of 11% to 95%. Among the three telecom operators, J.P. Morgan's top choice is China Telecom Corporation because it has the largest cloud platform among the three operators and is expected to benefit the most under the China AI theme, leading to a revaluation and growth in cloud computing business. China United Network Communications and China Mobile Limited follow behind. The bank maintains a "hold" rating for the three major operators' A shares but prefers H shares due to a discount of 29% to 35% compared to A shares.