Amid intensifying competition in China’s large language models (LLMs), the rise of agentic AI and AI super applications, demand for "tokens" continues to grow strongly, UOB Kay Hian said in a report. Enterprise AI adoption is enhancing cloud pricing power, increasing usage of AI agents, and expanding consumer AI assistants. The broker continued to view AI cloud as the preferred sub-sector within China’s internet sector and named BABA-W (09988.HK)  -0.500 (-0.375%)    Short selling $1.31B; Ratio 11.090%   as its core recommendation.

Over the next 6-12 months, the broker will focus on several AI narratives: (1) the evolution of LLM competition, (2) accelerating cloud revenue growth and margin expansion (alongside price hikes), (3) the launch of AI agent-based super applications, and (4) commercialization potential of leading vertical LLMs. The broker’s top pick was BABA-W, maintaining a Buy rating and a TP of HKD192 on the stock.

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Since the beginning of the year, competition has become more acute following DeepSeek’s open-source V4 release and rapid iterations by major players including Alibaba (Tongyi Qianwen), Tencent (Hunyuan), Moonshot AI (Kimi), MINIMAX-W (00100.HK)  +127.500 (+18.465%)    Short selling $43.95M; Ratio 2.207%   , ChatGPT 5.5 and Anthropic Mythos. The broker maintained Buy on Tencent with a TP of HKD728, and reiterated a Buy rating on BIDU-SW (09888.HK)  -2.200 (-1.575%)    Short selling $465.25M; Ratio 21.430%   with a TP of HKD170.

Regarding industry structure and commercialization path evolution, strong performance by independent AI players in coding and agent-based application scenarios, coupled with rapid growth in ARR, indicated improving pricing power for leading models. Meanwhile, new entrants such as XIAOMI-W (01810.HK)  +0.340 (+1.081%)    Short selling $504.37M; Ratio 15.585%   are lowering barriers and narrowing performance gaps through distillation techniques and open-source architectures, raising market concerns about industry fragmentation/consolidation and the long-term profitability of API/token-based models.

In response, major platforms have adjusted strategies: Alibaba has restructured Tongyi Qianwen to enhance synergies with its cloud and chip stack while strengthening agentic and coding capabilities; Tencent has accelerated internal restructuring, talent retention, and rollout of agent-based products, including WeChat integration, to narrow the gap.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-05-13 16:25.)

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