AI Momentum Spurs Revaluation of Hong Kong Internet Stocks

Driven by early AI rollouts, improving financial results, and a reduction in short positions, market participants are increasingly confident that the sector is entering a phase of strategic reappraisal. Leading platforms, long recognized for their ecosystem advantages, are now expected to see their core AI strategies reflected more fully in valuations.

In a detailed note, Zheshang Securities underscores that the evolving prosperity across three key subsegments—overseas compute infrastructure, domestic computing power, and AI-driven application services—will serve as the principal engine behind the next leg of gains. While global data-center capabilities first experienced strong tailwinds in 2023 and domestic compute resources have begun to accelerate this year, the AI application layer is poised for rapid expansion. Within this context, software companies specializing in large-scale AI models are likely to lead the initial charge.

From a product perspective, Hong Kong-listed internet firms fall into two broad categories. The first group, exemplified by Alibaba, Baidu, and Tencent, centers its AI efforts on general-purpose large-language models and cloud infrastructure. The second cohort targets specialized vertical applications, as seen at Meitu and Kuaishou, where AI-driven features are embedded directly into consumer offerings. Both camps are currently experiencing an inflection in AI-related revenue.

Alibaba’s second-quarter disclosures highlighted near-term AI and cloud investments totaling RMB 38.6 billion, underpinning a twenty-six percent year-over-year rise in cloud revenue and positioning AI-derived sales at over one-fifth of its external commercial income. Baidu, similarly, exceeded RMB 10 billion in new AI business revenue during the same period and reported significant progress across both AI-chip and model-development initiatives. At Tencent, the emergence of “Tencent Yuanbao” as a top-three AI-native application by daily active users illustrates accelerating consumer engagement, while the company simultaneously weaves AI capabilities into its core advertising, gaming, and social-network businesses.

AI adoption is also reshaping niche leaders. Meitu raised its subscription penetration to 5.5 percent in the first half of 2025 through AI enhancements, and Kuaishou’s text-to-video model “Keling” generated more than RMB 400 million in H1 revenue. Meanwhile, Xiaomi (01810.HK) is embedding advanced AI features into its latest smartphones and smart-home devices, Bilibili (09626.HK) has introduced the AniSora video-generation model to broaden its creative ecosystem, and JD.com is investing across large-model development, digital-human avatars, embodied intelligence, and autonomous agents.

Zheshang Securities observes that since 2023, the confluence of powerful AI trends and renewed capital market interest has ushered in a new investment era. The swift pace of technological advancement is reshaping these companies’ growth narratives and opening fresh opportunities for revenue expansion.

On a valuation basis, the Hang Seng Tech Index remains near multi-year lows. As of mid-September, its trailing-twelve-month price-to-earnings ratio hovered around twenty-three times, representing the thirty-second percentile since mid-2020. Within the index, Alibaba and Baidu trade at percentiles of thirty-eight and fifty over the past five years, respectively, while Tencent, despite a recent five-year percentile of eighty-four, sits at the forty-second percentile on a ten-year horizon.

More importantly, the valuation upside for leading AI-driven internet companies transcends simple multiple expansion. It reflects a fundamental transformation in growth logic driven by the AI revolution—a dynamic that promises to redefine long-term value creation for the sector.