Julia Pan

Pan maintains a BUY on Alibaba, expressing positivity on its cloud business which saw 36% revenue growth and expects over 40% next quarter. She highlights explosive growth in AI token usage on its platform. While core commerce is weak, the cloud and AI business is accelerating rapidly and is the key growth driver. Alibaba Cloud is the largest in China (3x Tencent's cloud revenue) and is well-positioned in infrastructure and enterprise AI. LONG due to the dominant position and high growth trajectory of the cloud/AI segment, which is strategically pivotal and can offset near-term commerce weakness. Failure to achieve the ambitious cloud growth targets or a deeper-than-expected slowdown in the core commerce business.

Pan maintains a BUY on Tencent, noting its earnings growth (17%) is "one of the most solid" among hyperscalers, despite investor concerns over its perceived lack of AI investment and cloud market share loss. The core gaming and social media businesses provide a solid earnings foundation. While its cloud business is smaller than Alibaba's, the company's overall financial stability is strong. LONG based on solid core earnings fundamentals, even if its AI narrative is currently less compelling than peers. Accelerating loss of cloud and AI market share to more aggressive competitors like Alibaba and ByteDance, pressuring future monetization.