Local investors in China are excited about the new trend in artificial intelligence stocks. This month, as the volume of mainland Chinese stocks, which are dominated by retail investors, surged to record highs, one of the big themes centered on generation engine optimization (GEO). The idea is that advertisers will spend more to have their brands appear in AI-generated chatbot results. Wei Wang, a researcher at Tianjin University of Business who runs 10 investment-focused China group chats with more than 3,000 members, said part of this shift is being driven by concerns about bubbles in AI chips and other computing power infrastructure. News of Metaplatforms’ acquisition of Manas in late December has also increased Chinese investors’ interest in agent AI, Wang said, referring to generative AI tools that can automatically make a series of decisions to produce better outcomes. Manas started developing agent AI tools for tasks such as market research and data analysis in China as a startup before relocating to Singapore. “AI agents and their monetization opportunities…are likely to be the top investment themes of 2026,” Bank of America analysts said in a note earlier this month. “We believe that the established Chinese internet ecosystem – Tencent, Alibaba, ByteDance – has a natural advantage in incorporating AI agents.” BofA analysts said, “In China’s internet space, we see Alibaba (buy) as the best agent for the ‘AI in China’ theme,” noting that the e-commerce giant is also strong in its AI cloud business. They rate the stock a “buy” and have a price target of $180. Alibaba this month upgraded its Qwen AI app to integrate with the company’s existing e-commerce platform, allowing users operating the chatbot to shop, order food and pay without leaving the app. Qwen claims to have over 100 million monthly active users. Gaming giant Tencent, which operates the WeChat app with around 1.4 billion users, has developed its own AI chatbot and AI-based advertising tools. “We continue to see Tencent as a key beneficiary of AI applications in China’s internet, given that AI has helped enable a long growth runway across all of the company’s major business lines: gaming, advertising, fintech, and cloud,” Goldman Sachs analysts said in a Jan. 19 report. The stock has a buy rating and a price target of HK$752. Adapting to changes in ad spending Analysts said privately held ByteDance, which owns TikTok, is leading the industry in China with Doubao, the country’s most popular AI app. Late last year, ByteDance also began testing ways to integrate Doubao’s AI capabilities into smartphones. “We believe 2026 will be a year of strategic transformation for China’s internet giants due to advances in AI.[consumer] Goldman analysts predict this year could be the first year the market recognizes potential disruptions to user habits. “Similar to trends seen in the U.S., we expect more brands and advertisers in China to adopt ROI-based advertising in e-commerce and local services,” analysts said, adding that they expect advertising budgets to shift from traditional search engine optimization (SEO) strategies to strategies that combine GEO and SEO. A similar AI-focused strategy called AEO (Answer Engine Optimization) predicts that China’s GEO market will surge from 250 million yuan ($35.9 million) in 2025 to 3 billion yuan ($430 million) this year, and another 9 billion yuan ($1.29 billion) in 2027. Still, it’s only a small part of China’s online social media. Goldman Sachs says the rapid development of AI means there is no guarantee which tools will ultimately yield the most commercial value, but the big players that adapt could be ahead of the curve, with Hong Kong-traded Alibaba and Tencent stocks among the three most popular stocks for net buying by mainland investors in the past seven days. This “southward” flow from the mainland to Hong Kong is “a significant influence, if not the price setter, for many Chinese internet stocks,” BofA analysts said, adding that the liquidity of stocks listed in the U.S., such as Alibaba, is comparable to or exceeds that in Hong Kong.
