Yamato: Increased visibility of AI monetization in Chinese technology stocks, prefer TENCENT (00700) and others.

Yamato released a research report stating that the Chinese internet stocks covered by the bank have all announced their performance for the March quarter. The bank's latest recommended ranking is Tencent (00700), NTES-S (09999), BIDU-SW (09888), BILIBILI-W (09626), and BABA-W (09988). The report indicates that the first quarter performance shows substantial AI revenue conversion in various areas such as cloud computing, advertising, and AI native applications. Alibaba and Baidu's AI cloud business growth accelerated, Tencent's AI-driven advertising technology continues to improve advertising effectiveness, and Kuaishou's Keling AI demonstrates strong revenue momentum, indicating that the market focus is shifting from model capability to usage-based monetization. The ecosystem and cloud business are currently the most clear channels for AI monetization. The bank expects significant milestones in the second half of the year, including the progress of Tencent WeChat AI Agent, the continuous advancement of Alibaba's AI cloud and MaaS monetization, and the more extensive adoption of AI workflows by enterprises. Token consumption, advertising conversion rates, and enterprise workflow execution will be more important indicators for AI commercialization than model releases. In addition, the bank points out that AI spin-offs and listings may reshape the valuation landscape. Kuaishou's Keling AI and Baidu's Kunlun chip show a clearer separation between the AI infrastructure/model layer and the application layer. With AI assets obtaining more independent valuations, some internet companies have the potential for revaluation, especially those with improved AI revenue visibility. The report notes that profit upside potential will focus on companies with existing monetization engines. NetEase has shown outstanding performance in structural profit margin expansion and a clear game pipeline for the second half of the year; while Meituan-W (03690) has the upside potential as the unit economic benefits of food delivery improve faster than expected. The bank also continues to see stable profit visibility from Tencent's gaming and Bilibili's advertising, among other core businesses.