Artificial intelligence is about to transform everything from transportation to health care. By the year 2030, it will add about $ 15.7 trillion to world GDP. A lot of American tech companies are surfing the AI wave, and a few of them, particularly Alphabet, Amazon, and Microsoft, are the main investments in AI.
But investors should not be limited to US companies. China aims to be the leading country in artificial intelligence research and services by 2030, and many of the country's technology companies are already on par with their US rivals in artificial intelligence – and sometimes exceed them in some cases.
This is why investors looking for new games on AI should consider Baidu (NASDAQ: BIDU), Ali Baba (NYSE: BABA) and Tencent Holdings (NASDAQOTH: TCEHY)
Baidu heads the future of AI
There is probably no better way to play for the rise of AI in China than by investing in Baidu. The company took a big step forward in the sector in 2014 by hiring one of Google's engineers in artificial intelligence at the time, Andrew Ng, who launched the Google Brain project. Today, Baidu has more than 2,000 employees working on artificial intelligence and has rapidly expanded its activities in this area.
Baidu uses artificial intelligence in many services, including online research, but one of his most important opportunities comes from his open source car project, dubbed Apollo. The company wants Apollo to do the same thing that Android has done for smartphones by becoming the platform of choice for autonomous vehicles. The company aims to commercialize autonomous vehicles in China from 2021 and has for many years conducted extensive vehicle testing in the United States and China.
In the last quarter, Baidu sales increased by nearly 27% to RMB 28.2 billion ($ 4.18 billion) and non-GAAP net income jumped 47% year-over-year to RMB 6.7 billion ($ 993 million). Like many technology stocks, Baidu's shares have recently been affected and have lost about 10% over the last three months. But as China is the largest auto market and the Chinese driverless auto market is expected to reach $ 500 billion by 2030, investors should not ignore the future benefits of this leading Chinese player. from the AI.
Tencent has a massive AI data opportunity
Data is one of the essential elements of artificial intelligence. Without this, the best software and algorithms would be virtually useless. In the United States, Google is the data king because it gathers tons of information about its users through its free services. In China, Tencent runs the data collection game.
The most important service of Tencent is its WeChat application, which has more than one billion active users, mostly in China. You could call this a social media application, but it's really a gateway to millions of Internet users; It is a place where Chinese users pay their bills, share social media posts, invite carpool services, play video games and more.
One of the most important ways in which society uses all this data for AI is to pursue its ambitions for health care. The company has launched an AI-based platform, Miying, in 2017, which allows health facilities to use AI to diagnose cancer. The artificial intelligence of Tencent also allows hospitals to analyze and manage medical records. With more than 38,000 medical institutions in China already using the WeChat app, the company uses its treasure of data to transform the country's medical industry.
In the last quarter, Tencent sales jumped nearly 24 percent to RMB 80.6 billion ($ 11.95 billion) and earnings per share jumped 29 percent to 2.44 yuan. The company's shares have risen about 19% over the last three months and, with the expansion of artificial intelligence in China, companies will rush to Tencent to get its data.
The dominance of e-commerce by Alibaba is only a beginning
Alibaba is best known for its dominance in China's e-commerce market, but the company is also becoming a major player in the field of artificial intelligence. A few months ago, he announced that he was developing his own AI chip, which will be available later this year.
The chip will be used in smart cities and autonomous vehicles, and will add to the company's current projects in smart city management. Alibaba also has its own robot with artificial intelligence for the hospitality industry and has developed a customer service agent in artificial intelligence for its logistics company, Cainiao. This array of AI-related business means that Alibaba has a huge opportunity to take advantage of the growing AI market in China in the coming years.
During the last quarter, Alibaba's business turnover grew 41% over the same quarter of the previous year, reaching 117.28 billion yuan (17.4 billion yuan). dollars) and sales of its core e-commerce business jumped 40 percent to 102.84 billion yuan (15.25 billion US dollars). These quarterly results, released in late January, have helped drive the company 's stock price up by about 15% over the last three months.
Investors should keep in mind that this company is already a dominant technology player in China and that it is about to become an AI center. While the Chinese government continues to focus its attention on the integration of artificial intelligence into its future, expect that Alibaba's ambitions for artificial intelligence will grow in parallel.
Like any equity investment, these Chinese stocks have their own set of risks. There is a lot of talk about the trade war between the US and China right now, which could scare some investors away from buying shares of China-based companies. In addition, some Chinese technology companies, including Huawei more recently, have been accused by the US government of stealing trade secrets. So, look carefully for any potential investment. Finally, be aware that as these companies gain a dominant position in artificial intelligence, they may experience some volatility.