[BEIJING] China's biggest tech companies have been bouncing off on ropes for years with ambitions to dominate everything from ropes and smart glasses to cheap meals. But investors want to focus their spending on where it counts, which is artificial intelligence (AI).
From meta platforms to Google, one topic dominates this technology revenue season. It's a way for Silicon Valley leaders to invest in seizing the momentum of game-changing technology. In China, the industry is fascinated by the three-way battle to deliver the fastest, cheapest meals and small items. In both the social media and physical consumer sectors, the conflict between JD.com and Meituan Alibaba Group Holdings and Meituan not only squeeze margins and plague investors, but also puts Beijing's scrutiny.
So far, JD, Alibaba and Meituan have hired delivery people, created coupons, created coupons with ads about free milk tea and other instant retail promotions, and hired millions of users every day. Investors responded with sales at Meituan and JD, the most exposed to the price war, and released a total market value of US$100 billion since the second half of last year.
Things came to mind last month when industry regulators took all three to private conferences to set up the law. And a few days later, the trio coordinated a statement of repentance that promised to end the “disorderly competition.”
But in reality, they are fighting for the lifeline of business in nature, so they have no choice but to continue doing it. With AI still a few years away from monetization, it has become a central existential issue for China Tech Inc.
“We want to increase the number of reasons to be optimistic about the decline in the food delivery war and the monetization of AI,” said Vey-Sern Ling, Managing Director at Union Vanserre Prive. “Ultimately, tech companies must bring top-line growth to perform. Advances in AI monetization are one way, whether through cloud services delivery or indirectly, by strengthening their respective core businesses.”
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After years of regulatory scrutiny and community disruption, the country's biggest tech company is once again bolstering its deals and users are competing fiercely to drive growth. Investors have piled up China's tech revival over the past year, betting on the country's biggest companies after a settlement with Xi Jinping national government in February. These companies are still well below their peak. Food Wars didn't help. But one outlier was Tencent – better than his biggest peers this summer.
Tencent launched its big-tech revenue season on Wednesday (August 13) with revenues surpassing plans of AI spending prudence and AI spending prudence despite faster than planned growth across the gaming and advertising business. Its shares rose up 2.4% in Hong Kong on Thursday, reaching its highest level in more than four years.
JD suddenly made its way into food delivery in February, sparking a price war between Alibaba and market leader Mate Anne. That's what Morgan Stanley calls the “prisoner dilemma,” three heavyweights trapped in seemingly irrational conflicts, and never blink first. After early progress, JD has struggled to attract new users, and investors are looking for clues on the direction behind their spending areas.
“It's very difficult to guess what JD wants to do. They're doing a lot of different things here and there and trying to spend a lot of money, but I don't know what they want to achieve.” “All of a sudden, they're doing it all at the same time.”
Alibaba's margins are expected to be hit by massive spending plans, including throwing US$52 billion on AI infrastructure and branching out US$7 billion in food supply subsidies. Investors are also asking difficult questions about their strategy.
“The food delivery business may not be that important for Alibaba, but when it comes to battle, they cannot retreat,” said Li Cheng Dong, head of Beijing-based internet think tank Highton. “While the enormous spending these days is definitely not something investors want to see, Alibaba's investment in AI remains uncertain and current investments don't necessarily have results.”
Meituan enjoys fresh momentum from behind the scenes of its partnership with Chinese live streaming platform Kuaishou. But like JD, he appears to build an empire overseas, which makes him distracted at home. The company's successful Keeta app in Hong Kong has set up templates for overseas movements. It was launched in Saudi Arabia last September and is focusing on expanding to Qatar, Kuwait, Oman and Bahrain over the next three years, according to Chinese media outlet LatePost.
“When everyone returns to normal business judgment and rationality, the competition stops,” Meituan's local commercial director Wang Puzhong told LatePost last month. “Now we are all in a state of irrational excitement.” Bloomberg
