Citi analysts highlighted three major Chinese internet names they view as well placed to capture value from the next wave of artificial intelligence development. The bank focused on firms with deep, layered AI capabilities and positions across the AI value chain.
Sector backdrop
Citi observed that Chinese internet equities have traded lower so far this year, which the bank said could present attractive buying opportunities for investors seeking exposure to AI development in the region. The bank also noted that the sector is down roughly 14% year-to-date.
Tencent
Citi singled out Tencent for its work on agentic systems, which the bank described as a step beyond conventional chatbot applications and toward platforms able to manage and coordinate multiple AI agents at scale. According to the bank, building a full-stack AI capability is both challenging and capital intensive, and Tencent's layered AI resources and financial strength position it well in that environment.
The bank also referenced recent company developments: Tencent has been testing a prototype of an embedded AI agent and is leading a significant funding round for the AI startup DeepSeek. These items were cited by Citi as evidence of Tencent's active engagement in agentic and embedded AI initiatives.
Alibaba
Alibaba was presented by Citi as a full-stack AI play with capabilities that extend across the broader AI value chain rather than being confined to a single layer. The bank flagged valuation upside as a central element of its thesis, suggesting that the market may not yet be fully valuing Alibaba's AI potential given the sector's underperformance year-to-date.
Citi noted two concrete product and platform developments from Alibaba: the unveiling of the next-generation AI chip, the XuanTie C950, and the launch of an enterprise AI platform named Wukong, which is currently in an invitation-only testing phase. Both items were used to support the view of Alibaba as a multi-layer AI participant.
Baidu
Baidu was identified for its full-stack AI capabilities and potential valuation upside. Citi pointed to Baidu's long-running investments in AI infrastructure, its cloud business and the Ernie model ecosystem as underpinning its full-stack narrative.
The bank suggested Baidu is among the names where the market discount to intrinsic value looks most compelling, referencing the broader sector decline of about 14% year-to-date. Citi also noted a corporate development tied to Baidu's chip ambitions: Kunlunxin, the chip unit in which Baidu holds a majority stake, has initiated a process for a dual listing on the Shanghai STAR Market and in Hong Kong.
Implications
Citi's selection highlights three different ways AI exposure can manifest in large Chinese internet companies: agentic systems and embedded agents at Tencent, end-to-end AI stack and dedicated chips and platforms at Alibaba, and infrastructure plus model ecosystems at Baidu. The bank emphasized the capital intensity and complexity of building full-stack AI as a differentiator among these firms.