Goldman Sachs named Chinese stocks it says are likely to benefit from developments in generative artificial intelligence — and two are on the bank’s conviction list of buy-rated names. In two research notes dated July 16, Goldman gave an overview of opportunities and risks created by generative AI and picked the stocks likely to benefit. Generative AI will require large amounts of data processing-capacity, which is set to boost the cloud computing arms of Chinese internet giants Baidu , Alibaba and Tencent , said Goldman’s analysts, led by Ronald Keung. In its base case scenario, the bank said, it expects generative AI to add 151 billion yuan ($21 billion) to the cloud computing market in China by 2027. E-commerce firm Alibaba is on Goldman’s conviction list — the bank said it expects the company to be “back to positive advertising + commission growth from the June 2023 quarter,” adding that it has an attractive valuation. “We see Alibaba as one of the best value stock proxies to enjoy the advertising recovery, fintech … and cloud structural growth,” the analysts said. Baidu is also on Goldman’s conviction list. The bank described it as a “key AI beneficiary given its multi-year investments as an AI leader in China.” In 2019, Baidu launched its large language model (LLM) chatbot Ernie, and Goldman said the company is “in a leading position in LLM and AI after years of investment.” As for WeChat owner Tencent, the bank sad it “continues to be one of our top Buy ideas within China Internet on advertising growth and payment recovery this year, as highlighted in our 2023 outlook. We continue to see Tencent as a key advertising recovery proxy helped by Video Accounts and broader WeChat ad recovery.” — CNBC’s Michael Bloom contributed to this report.
