Chinese tech stocks have been among the most disappointing names on Wall Street and their home market in the post-COVID era. The economic slowdown in China, along with a lack of government stimulus made it an uphill battle for these tech companies to post any meaningful growth. Instead, the government cracked down on these tech companies for various reasons.
However, the landscape has shifted significantly in recent months. The Chinese government is now waking up as its overly restrictive policies have caused enormous damage to its stock market and it is now turning to stimulating measures. Xi Jinping recently met with tech leaders and China established a 60 billion yuan AI industry investment fund at the start of this year.
That’s not a lot when you compare it to something like Stargate, but it’s much better than being hostile to tech companies. Chinese tech companies themselves are quite profitable and can collectively invest hundreds of billions in AI and data centers over the coming years. Most of them are trading at bargain-basement prices, so snapping them up now could lead to triple-digit gains. Here are three Chinese tech stocks to look into:
Baidu (NASDAQ:BIDU) is China’s Google, but it trades at just 9 times its earnings. It is down 74% from its 2021 peak but it has been slowly turning the corner and investors are warming up to the company.
In the best-case scenario, BIDU could make a sharp recovery like it did in late 2020. Q4 2024 revenue fell 2% year-over-year to $4.68 billion, but AI Cloud revenue grew significantly by 26% year-over-year to $974 million. ERNIE AI handled approximately 1.65 billion API calls daily in December 2024 and external API calls increased 178% quarter-over-quarter.
Wall Street doesn’t like the report due to the top-line decline, but I still think this is a good long-term bet on China’s tech revival. Baidu is transitioning from an internet-centric to an AI-first business model, and once its core business also starts recovering, the growth numbers will look solid.
Lenovo (OTCMKTS:LNVGY) has a good reputation outside of China and unlike other Chinese tech companies, it has avoided any meaningful scrutiny in the West. The company could follow in the footsteps of Xiaomi (OTCMKTS:XIACY) as it is expanding significantly into all sorts of electronics globally and is focusing more on AI.
The company increased its R&D investment by 14% to $621 million and just reported Q3 FY24/25 results with revenue growing 20% year-over-year to $18.8 billion and net income more than doubling to $693 million. On top of that, it received a non-recurring income tax credit of $282 million in Q3.
Infrastructure Solutions Group (ISG) saw a 59% revenue increase in Q3 as China’s server demand has been explosive. CEO Yang Yuanqing projects AI PCs will account for 25% of Lenovo's shipments by 2025 and potentially 80% by 2027.
Analysts expect the pace of growth to stick around, and considering you’re paying just 0.3 times forward sales and 17 times forward earnings, the stock could easily deliver triple-digit gains.
LNVGY also comes with a 3.1% dividend yield.
Alibaba (NYSE:BABA) has been trading sideways for well over two years and only recently started to deliver some gains. High-profile investors David Tepper and Michael Burry are betting on this stock.
The impact of DeepSeek could keep the stock elevated this time around. There’s a good chance BABA stock could finally start recovering meaningfully as it walks in Amazon’s (NASDAQ:AMZN) footsteps. Alibaba is investing heavily in capturing China’s AI and data center market and even has its own AI models, which it claims are better and more efficient than DeepSeek.
It has also started to accelerate its top-line growth. Total revenue increased 8% year-over-year to RMB 280.15 billion ($38.38 billion). Net profit reached RMB 48.945 billion ($6.72 billion), and Taobao and Tmall Group customer management revenue grew 9% year-over-year to RMB 100.79 billion. International Digital Commerce Group surged 32% to RMB 37.76 billion, and Cloud Intelligence Group revenue grew 13% year-over-year to RMB 31.74 billion.
Alibaba expects its cloud revenue to accelerate. BABA stock also comes with a 1.6% dividend yield.
