The Chinese stock market has been surprisingly resilient in recent weeks despite the country being in the crosshairs of the Trump administration. The Hang Seng Index declined 13% in the first half of April but has been rebounding and is up 12% year-to-date. Moreover, China is starting to stimulate the economy to guard itself from a tariff-driven downturn.
China has ramped up stimulus even before tariffs kicked in, so the stimulus measures going forward are expected to be even more aggressive. Companies in China have started catching up in AI post-DeepSeek, and investment in AI seems to be supercharged. For example, Pony AI (NASDAQ:PONY) showcased its own Robotaxis this week, and BYD (OTCMKTS:BYDDY) has trounced Tesla (NASDAQ:TSLA) in both financials and the stock market.
More recently, Huawei has come out with an AI chip. The Ascend 910C is Huawei's latest commercially available AI chip, with mass shipments to Chinese customers beginning as early as May 2025. Huawei is also developing the more advanced Ascend 910D, and this aims to surpass NVIDIA's H100 in performance. On top of that, the production line here is profitable for the first time.
Alibaba (NYSE:BABA) is one of China’s biggest cloud producers, and it is also becoming one of the biggest competitors in the AI race. Maintaining and making AI models is very costly, and any sort of reduction on the hardware front is going to directly benefit Alibaba Cloud. Huawei’s chips are likely to cost much less than imported chips from NVIDIA, especially if tariffs stick around.
Alibaba itself has made some progress in the AI race. It recently unveiled its Qwen 3 AI model with hybrid reasoning. It is doubling down on artificial intelligence, and analysts are also overwhelmingly bullish on the stock. BABA stock has been quite resilient as well and has started recovering instead of tumbling, and it is up over 40% year-to-date.
Unlike many Chinese companies, Alibaba has minimal exposure to the US market, with international commerce retail constituting 11% of revenue. The domestic focus shields it from the most recent trade war, and China’s increasing spending on AI is only going to help the company. Alibaba announced plans to invest over $53 billion in AI and cloud computing over the next three years. Investors have been asking for growth here as the company already has plenty of profits, and this AI investment could be the final piece of the puzzle.
The consensus price target of $150.36 implies 26% upside.
Kingsoft Cloud (NASDAQ:KC) is a pure-play cloud computing company, and the stock has delivered explosive returns in just the past six months as it is up 324.6%. This could be one of the biggest beneficiaries of China developing its own chip industry.
The strategic partnership between Kingsoft and Huawei is already well-established. Bi Xiaocun, Kingsoft Office's senior vice president said that Huawei Cloud is an essential partner for Kingsoft Office's global expansion. The two companies have collaboratively developed an excellence framework that supports heterogeneous compute and intelligent O&M.
Huawei’s domestic AI chips could de-risk the company’s operations significantly. The CloudMatrix 384 system integrates 384 Ascend 910C chips and could deliver 300 PFLOPs of dense BF16 compute, which is almost double that of Nvidia's GB200 NVL72. This kind of computing power would let Kingsoft scale its AI offerings significantly without worrying about future US restrictions.
Kingsoft Cloud has already been seeing solid growth. Q4 2024 revenue grew 29.6% year-over-year to RMB 2,232.1 million or $305.8 million. Its AI cloud business saw its gross billing increase by 500% year-over-year to RMB 474 million.
Kingsoft Cloud's AI revenue has been growing at triple-digit rates for six consecutive quarters and now accounts for 34% of its public cloud revenue. Cheaper chips from Huawei will also boost margins. This is much more high-risk, since the consensus price target of $7.47 implies 39.74% downside. Even the highest target at $12.5 implies flat upside.
