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Business Times
2 days ago
- Business
- Business Times
Tencent's AI restraint shows risk of Alibaba, JD food war
[BEIJING] China's biggest tech companies are bouncing back after years on the ropes with outsized ambitions to dominate in everything from robots and smart glasses to cheap meals. But investors want them to focus their spending where it counts – artificial intelligence (AI). From Meta Platforms to Google, one topic has dominated the conversation this tech earnings season: how Silicon Valley's leaders will invest to seize the momentum in a game-changing technology. In China, the industry is just as enthralled by a three-way battle to deliver the cheapest meals and knick-knacks, fastest. That conflict between Alibaba Group Holding, and Meituan, both on social media and in the physical consumer arena, is not just compressing margins and irking investors - it's risking Beijing's scrutiny. So far this year, JD, Alibaba and Meituan have pledged or spent billions of US dollars hiring delivery people, creating coupons and plying their millions of daily users with advertising about free milk tea and other instant retail promotions. Investors responded with a sell-off in Meituan and JD, the most exposed to the price war, shedding around a combined US$100 billion in market value since late last year. Things came to a head last month when the industry regulator called all three into a private meeting to lay down the law. And days later, the trio coordinated contrite statements promising to end 'disorderly competition'. But in reality, they have no choice but to keep going, analysts say, because they are essentially fighting for the lifeblood of their business: users. With AI still years away from monetisation, that's become the central existential problem to China Tech Inc. 'We want less food delivery wars and more reasons to be optimistic about AI monetisation,' said Vey-Sern Ling, managing director at Union Bancaire Privee. 'Ultimately, for tech companies to perform, they have to deliver top-line growth. Progress on the monetisation of AI is one way – whether directly, such as through the provision of cloud services or indirectly by enhancing their respective core businesses.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up After years of regulatory scrutiny and Covid-era disruption, the country's biggest tech firms are once again ramping up deals and competing fiercely for users to propel growth. Investors have piled into China's tech resurgence over the past year, betting on the country's biggest firms after a rapprochement with President Xi Jinping's government in February. Those companies are still trading far below their peak. The food wars did not help. One outlier, however, has been Tencent - it's outperformed its biggest peers this summer. Tencent on Wednesday (Aug 13) kicked off earnings season for China's big tech with revenue that beat estimates and a plan for prudence in AI spending, despite faster-than-anticipated growth across its gaming and advertising businesses. Its shares rose as much as 2.4 per cent in Hong Kong on Thursday, reaching their highest level in more than four years. JD made a sudden foray into food delivery in February, sparking a price war with Alibaba and market leader Meituan. It's what Morgan Stanley refers to as the 'prisoner's dilemma', three heavyweights locked in a seemingly irrational conflict, none willing to blink first. After making early progress, JD is struggling to attract new users, and investors are clamouring for clues about the direction behind the spending spree. 'It's very difficult to guess what JD wants to do. They have been all over the place doing various things, trying to spend a lot of money, but we do not know what they want to achieve,' said Roxy Wong, senior portfolio manager at BNP Paribas Asset Management Asia. 'All of a sudden, they are doing everything at the same time.' Alibaba's margins are expected to take a toll from its massive spending plans, which include splashing US$52 billion on AI infrastructure and forking out US$7 billion on food delivery subsidies. Investors are also asking tough questions about its strategy. 'For Alibaba, the food delivery business may not be that important, but when it comes to the battle, they cannot retreat,' said Li Chengdong, head of Beijing-based Internet think-tank Haitun. 'While the recent huge spending is definitely not what investors are keen to see, Alibaba's investment in AI remains an uncertainty, as well as the current investment may not necessarily yield results.' Meituan is enjoying fresh momentum off the back of a partnership with Kuaishou, a Chinese live-streaming platform. But like JD, it's getting distracted at home as it looks to build an empire abroad. The company's successful Keeta app in Hong Kong has set a template for overseas moves. It launched in Saudi Arabia last September and, according to Chinese media outlet LatePost, it's now eyeing expansion into Qatar, Kuwait, Oman and Bahrain over the next three years. 'The competition will stop when everyone returns to normal business judgment and rationality,' Wang Puzhong, head of local commerce at Meituan, told LatePost last month. 'Right now we are all in a state of irrational excitement.' BLOOMBERG
Mint
2 days ago
- Business
- Mint
Tencent's AI Restraint Shows Risk of Alibaba, JD Food War
(Bloomberg) -- China's biggest tech companies are bouncing back after years on the ropes with outsized ambitions to dominate in everything from robots and smart glasses to cheap meals. But investors want them to focus their spending where it counts — AI. From Meta Platforms Inc. to Google, one topic has dominated the conversation this tech earnings season: how Silicon Valley's leaders will invest to seize the momentum in a game-changing technology. In China, the industry is just as enthralled by a three-way battle to deliver the cheapest meals and knick-knacks, fastest. That conflict between Alibaba Group Holding Ltd., Inc. and Meituan — both on social media and in the physical consumer arena — isn't just compressing margins and irking investors — it's risking Beijing's scrutiny. So far this year JD, Alibaba and Meituan have pledged or spent billions of dollars hiring delivery people, creating coupons and plying their millions of daily users with advertising about free milk tea and other instant retail promotions. Investors responded with a sell-off in Meituan and JD, the most exposed to the price war, shedding around a combined $100 billion in market value since late last year. Things came to a head last month when the industry regulator called all three into a private meeting to lay down the law. And days later, the trio coordinated contrite statements promising to end 'disorderly competition.' But in reality, they've no choice but to keep going, analysts say, because they're essentially fighting for the lifeblood of their business: users. With AI still years away from monetization, that's become the central existential problem to China Tech Inc. 'We want less food delivery wars, and more reasons to be optimistic about AI monetization,' said Vey-Sern Ling, managing director at Union Bancaire Privee. 'Ultimately for tech companies to perform they have to deliver top line growth. Progress on the monetization of AI is one way — whether directly, such as through the provision of cloud services or indirectly by enhancing their respective core businesses.' After years of regulatory scrutiny and Covid-era disruption, the country's biggest tech firms are once again ramping up deals and competing fiercely for users to propel growth. Investors have piled into China's tech resurgence over the past year, betting on the country's biggest firms after a rapprochement with President Xi Jinping's government in February. Those companies are still trading far below their peak. The food wars didn't help. One outlier however has been Tencent — it's outperformed its biggest peers this summer. Tencent on Wednesday kicked off earnings season for China's big tech with revenue that beat estimates and a plan for prudence in AI spending, despite faster-than-anticipated growth across its gaming and advertising businesses. Its shares rose as much as 2.4% in Hong Kong on Thursday, reaching their highest level in more than four years. JD made a sudden foray into food delivery in February, sparking a price war with Alibaba and market leader Meituan. It's what Morgan Stanley refers to as the 'prisoner's dilemma' — three heavyweights locked in a seemingly irrational conflict, none willing to blink first. After making early progress, JD is struggling to attract new users and investors are clamoring for clues about the direction behind the spending spree. 'It's very difficult to guess what JD wants to do. They've been all over the place doing various things, trying to spend a lot of money, but we do not know what they want to achieve,' said Roxy Wong, senior portfolio manager at BNP Paribas Asset Management Asia Ltd. 'All of a sudden they're doing everything at the same time.' Alibaba's margins are expected to take a toll from its massive spending plans, which include splashing $52 billion on AI infrastructure and forking out $7 billion on food delivery subsidies. Investors are also asking tough questions about its strategy. 'For Alibaba, food delivery business may not be that important, but when it comes to the battle, they cannot retreat,' said Li Chengdong, head of Beijing-based internet think-tank Haitun. 'While the recent huge spending is definitely not what investors are keen to see, Alibaba's investment in AI remains an uncertainty as well as the current investment may not necessarily yield results.' Meituan is enjoying fresh momentum off the back of a partnership with Kuaishou, a Chinese live-streaming platform. But like JD it's getting distracted at home as it looks to build an empire abroad. The company's successful Keeta app in Hong Kong has set a template for overseas moves. It launched in Saudi Arabia last September and according to Chinese media outlet LatePost, it's now eyeing expansion into Qatar, Kuwait, Oman and Bahrain over the next three years. 'The competition will stop when everyone returns to normal business judgment and rationality,' Wang Puzhong, head of local commerce at Meituan, told LatePost last month. 'Right now we are all in a state of irrational excitement.' —Charlotte Yang, Claire Che More stories like this are available on
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Business Standard
20-06-2025
- Business
- Business Standard
Chinese tech giants chase expansion in Brazil amid global trade pressures
Chinese companies urgently need to find new markets. Competition is intense at home, where the collapse of the real estate market has left consumers reluctant to spend. And escalating trade tensions have made it more difficult and costly to sell things in the United States and Europe, long two of the largest destinations for Chinese exports. As a result, some of China's biggest internet and e-commerce brands have set their sights on establishing themselves as household names in other parts of the world, like Southeast Asia, the Middle East and South America. Brazil has emerged as the most coveted prize. Latin America's largest economy, with a population of more than 200 million people, is a beacon for China's delivery and ride-hailing companies looking to export their ruthlessly low-cost business models. Chinese e-commerce giants also see promise in Brazil as they seek new buyers for a flood of products after tariffs and other restrictions in the United States shut off their biggest export market. Meituan, China's largest food delivery company, said in May that it would spend $1 billion to set up operations in Brazil. Mixue, the Chinese tea and dessert company that has eclipsed McDonald's as the world's biggest fast food chain, said it would hire thousands there. TikTok Shop, facing scrutiny in the United States and Britain about its Chinese parent company, launched in Brazil in May. 'Chinese companies are finding it harder to grow domestically,' said Vey-Sern Ling, an equities adviser in Singapore at the private bank Union Bancaire Privée. 'Exports and overseas expansion is one way to support continued growth.' Chinese interest in Brazil comes as the two countries deepen their economic ties. The overall value of trade between China and Brazil roughly doubled over the past decade, as Chinese companies bought Brazilian soybeans and consumers in Brazil bought Chinese cars and electronics. Last month, while officials from Washington and Beijing were haggling over whether to roll back tariffs that had brought their trade to a standstill, Chinese companies announced plans to invest about $4.7 billion in Brazil. The investments include mining and renewable energy projects and expanded automotive manufacturing. President Luiz Inácio Lula da Silva of Brazil also met with China's leader, Xi Jinping, in Beijing. The two leaders have positioned their relationship as a counterweight to US influence. Analysts say the good will has given Chinese consumer companies confidence to bet on Brazil. 'The relationship between the two countries is really good, and they expect it to be good for a while,' said Jianggan Li, the chief executive of Momentum Works, a consultancy in Singapore. But Chinese companies are not assured of success in Brazil. Their tactics may draw scrutiny from regulators as they try to attract customers and hire local workers, said Li, who was previously an executive at Food Panda, which competes in Hong Kong with Meituan's food delivery service, Keeta. Meituan is known for its cutthroat approach. In China, it operated at a loss for years while offering shoppers steep discounts in order to undercut competitors. In 2023, the company launched Keeta in Hong Kong, its first foray outside mainland China. In less than two years, Keeta drove one of Hong Kong's main food delivery platforms, Deliveroo, out of the market. Meituan deployed similar tactics last year when it rolled out Keeta in Saudi Arabia, where it quickly became the dominant delivery platform in most major cities. How to Survive a Crisis Analysts expect Meituan to operate the same way in Brazil. The company's focus will not be on turning a profit, but instead be on becoming the delivery app used by the highest number of people. 'When the Chinese companies go abroad, making money is the secondary priority — they want to dominate the market first,' said Heatherm Huang, a co-founder of Measurable AI, a Hong Kong-based tech company that analyzes online shopping data for financial firms. Many Chinese consumer brands have already made inroads in Brazil. The country is one of the largest markets for the fast-fashion retailer Shein, which has built three warehouses near São Paulo. Didi, known for running Uber out of China, took over a Brazilian start-up called 99 in 2018 and has been one of the main ride-hailing business in the country since. Temu, the international arm of the Chinese e-commerce firm Pinduoduo, started selling products to Brazilians last year. Temu's main gimmick has been to tell shoppers that they are getting items at steep discounts, often 70 per cent or more. The push to expand in places like Brazil is driven in part by increased competition in China, and restrictions and regulatory scrutiny in other major markets. Chinese e-commerce companies like Temu and Shein took a major hit in the United States last month when the Trump administration ended a policy that had allowed low-value packages from China to enter the country tax-free. Lawmakers in the European Union are debating a similar change. In Brazil, shipments from Temu and Shein have been hit with a tax on packages worth less than $50 since last year. But at 20 percent, the tax is less than half the rate now charged by the United States. The business models pioneered by Meituan and other Chinese internet companies have also raised concerns among Chinese regulators about the handling of user data and the treatment of delivery drivers. Last year, a driver who worked such long delivery shifts that fellow drivers referred to him as the 'order king' died while taking a break between deliveries, according to Chinese social media. After another driver fainted on the job and was hospitalised, Meituan published a report that said most of its drivers did not work such intense hours and made wages comparable to average salaries. These sorts of incidents have prompted the Chinese government to issue rules for how e-commerce companies manage delivery workers. In February, competition intensified when the e-commerce giant JD launched a food delivery service in China. It and Meituan have tried to lure drivers from each other by offering increasingly generous, and costly, benefits. Meituan, Mixue and Temu did not respond to requests for comment. 'The golden time for Meituan's food delivery business in China may be over,' said Ernan Cui, a consumer analyst at the research firm Gavekal Dragonomics in Beijing. Stricter regulation and tougher competition are 'all adding pressure,' she said. China's stagnant consumer economy is another reason Chinese companies believe expanding in places like Brazil is worth the risk, said Li of Momentum Works. 'Finding extra growth in China is getting harder and harder,' he said.
Yahoo
21-05-2025
- Business
- Yahoo
Alibaba Shares Slide as AI Deal with Apple Faces US Scrutiny
Alibaba Group Holding Limited's (NYSE:BABA) impressive run came under pressure on May 19 as it emerged that authorities in the US are scrutinizing a potential strategic partnership with Apple. The Chinese tech giant shed as much as 4.8% in market value as White House and Congressional officials ramped up scrutiny of a deal that would make Alibaba's AI features available on iPhones tailored for Chinese consumers. A finanical sector worker working on a laptop in front of a row of cubicles. The scrutiny in the US adds to a wave of headwinds that have paused Alibaba's explosive run in the first quarter of the year. The stock rallied by more than 40% in the first quarter but has come under pressure on disappointing quarterly results, with revenues missing estimates. The stock sentiments have since taken a hit amid reports that incorporating the Chinese tech giant's AI features in iPhones is facing some opposition. Similarly, Apple could face some damage should authorities block the incorporation of Alibaba AI features in its devices. The US tech giant has been trying to revive its iPhone sales growth rates in China in recent years amid stiff competition from local manufacturers. In the first quarter ended March iPhone sales in China were down by 2.3% amid stiff competition from Xiaomi and Huawei. Incorporating Alibaba AI features was a crucial development that would have strengthened the iPhone's competitive edge in the Chinese smartphone market. Consequently, Vey-Sern Ling, managing director at Union Bancaire Privee, insists Apple has more to lose than Alibaba if authorities block the proposed partnership. While we acknowledge the potential of Alibaba Group Holding Limited's (NYSE:BABA) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than BABA and that has 100x upside potential, check out our report about the cheapest AI stock. READ NEXT: and . Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
19-05-2025
- Business
- Yahoo
Alibaba Fall After U.S. Throws Wrench in Apple's China AI Deal
Alibaba (NYSE:BABA) just took a hitfalling 4.8% in Hong Kongafter fresh headlines suggested the White House is pushing back on Apple's plan to bring Alibaba's AI to iPhones in China. The potential deal, once seen as a win-win, now faces political friction that could stall or even scrap the rollout. Apple (AAPL), Alibaba, and the U.S. government haven't commented, but behind the scenes, the pressure appears real enough to spook investors already on edge after Alibaba's earnings miss last week. Warning! GuruFocus has detected 3 Warning Signs with BABA. The timing couldn't be worse for Apple either. China is its second-largest market, and its sales there dipped 2.3% last quarter as competition from Huawei and Xiaomi heats up. Analysts warn that without a homegrown AI partner, Apple risks losing its edge in a market where AI-driven features are fast becoming table stakes. Apple has much more to lose than Alibaba if it walks away from the AI deal, noted Vey-Sern Ling at Union Bancaire Privee. A delay or breakdown could force Apple to scramble for alternatives, while its Chinese rivals double down. For Alibaba, the setback throws a wrench into its comeback story. Investors had rallied behind the stock earlier this year on hopes that its AI momentumespecially with a high-profile partner like Applecould reignite growth. But with Washington's glare intensifying, that narrative could be slipping. Bloomberg Intelligence warns the uncertainty may hold back Alibaba's cloud investment and R&D in the short term. For now, one thing's becoming clearer: this isn't just a tech dealit's another geopolitical battleground. This article first appeared on GuruFocus.
