J.P. Morgan: Constructive view on China's AI value chain industry; top picks BABA-W (09988), TENCENT (00700), and Z.AI (02513)

J.P. Morgan released a research report stating that it has expanded coverage of China's artificial intelligence (AI) value chain for the first time and holds a constructive view on the industry. The bank's top picks are BABA-W (09988), TENCENT (00700), and Z.AI (02513), all rated "Overweight," with target prices of HK$205, HK$690, and HK$2,000, respectively. Alibaba possesses chip, cloud, and model integration capabilities; Tencent owns scarce AI application assets that are not yet fully reflected in its valuation; Z.AI has differentiated intelligence to drive paid usage. The bank estimates that during the period from 2026 to 2030, the cumulative operating profit of China's AI value chain will reach US$544 billion, with models and applications contributing one-third of industry profits and accounting for nearly two-thirds of earnings growth during the period. On the other hand, the share of hardware profits is expected to decline from 93% in 2026 to 30% in 2030. The report expects that China's token demand will grow by approximately 60 times between 2026 and 2030, with enterprise-side demand projected to account for 69% of total consumption in 2030, while the remaining 31% will come from the consumer side. Revenue from hardware, cloud, and models plus applications is expected to grow by 1.8 times, 12.5 times, and 26.9 times, respectively, while the operating profit of China's AI industry will rise from US$27 billion this year to US$243 billion in 2030.