Chinese e-commerce giant Alibaba is anticipating a new era of growth opportunities driven by AI services. The company made this announcement during a conference call with analysts, stating that the demand for training artificial intelligence models on the cloud is so high that they are unable to meet all the requests due to a shortage of processing power.
Alibaba has identified cloud as one of its six business units with clear plans for an IPO. Meanwhile, rival Tencent is also expected to discuss its AI business plans in an upcoming report.
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The training of AI models is driving the demand for chips from Nvidia, but the commercial returns on AI development in the near term are less clear. However, HSBC analysts are optimistic about the potential in Chinese AI hardware stocks due to the urgent need for hardware upgrades as computational power doubles every three and a half months.
HSBC has buy ratings on three mainland China-listed stocks: Foxconn Industrial Internet, Innolight, and Montage. These companies are expected to benefit from AI investments from major tech companies such as Microsoft, Google, and Amazon.
Foxconn Industrial Internet is an Nvidia supplier, Innolight manufactures optical transceivers for cloud data centers, and Montage is an integrated circuit company.
Though concerns exist about the ability of U.S. investors to tap into the gains made by Chinese AI companies, the Biden Administration’s executive order and pending Treasury regulations indicate a limited impact on stock investments.
Taylor Ogan, CEO of Snow Bull Capital, has relocated to China to focus on Chinese AI and green energy companies. Despite the uncertainties in the AI space, Ogan believes that high risk can lead to high rewards.
Amid geopolitical concerns, the future of AI as a commercially viable technology remains uncertain. The CEO of Nasdaq-listed AI company Xiao-I noted the importance of creating commercial value from technology.
Xiao-I has focused on integrating AI with various businesses and has found call centers to be the most successful application for their technology.
The Chinese government is closely monitoring the development of generative AI services and has implemented new rules to protect personal data and intellectual property. However, the final version of the regulations does not include a blanket license requirement.
Chinese leaders have expressed support for the overall development of AI in the country.
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