Citi has singled out three Chinese internet names it views as best positioned to capture opportunities from artificial intelligence advancement. The investment bank pointed to companies with the technical breadth and capital resources required to develop full-stack AI solutions and agentic systems - capabilities it says are likely to be critical as the next phase of AI evolves.
Summary assessment
Citi argued that the Chinese internet sector’s underperformance this year has created potential buying points for investors focused on AI exposure. Within that framework, the bank highlighted Tencent, Alibaba and Baidu for distinct reasons tied to their product roadmaps, infrastructure investments and valuation characteristics.
Tencent - agentic systems and layered AI capabilities
Citi singled out Tencent for its strengths in agentic systems, which the bank described as the next wave of AI beyond basic chatbots. Agentic systems refer to platforms capable of managing and coordinating multiple AI agents at scale. According to the bank, Tencent’s deep, layered AI capabilities combined with its capital base make it well-suited to compete in an environment where building a full-stack AI capability is both challenging and costly.
The bank also noted two recent company developments it views as relevant: Tencent is reportedly testing a prototype of an embedded AI agent, and it is leading a major funding round for the AI startup DeepSeek. These moves were cited as evidence of Tencent’s activity around agentic and embedded AI initiatives.
Alibaba - a full-stack play with valuation upside
Citi described Alibaba as a full-stack AI play, stressing that the company has capabilities that span multiple layers of the AI value chain rather than focusing on a single layer. The bank pointed to valuation upside as a key part of its thesis, arguing that Alibaba’s AI potential may not yet be fully reflected in its share price given the sector’s weakness year-to-date.
The bank referenced two specific product developments from Alibaba: the unveiling of its next-generation AI chip, the XuanTie C950, and the launch of an enterprise AI platform named Wukong, which is currently in an invitation-only testing phase. Citi treated both as material elements of Alibaba’s full-stack positioning.
Baidu - AI infrastructure, Ernie ecosystem and listing plans
Citi highlighted Baidu for its full-stack AI capabilities and the potential for valuation upside. The bank pointed to Baidu’s sustained investments in AI infrastructure and cloud, along with its Ernie model ecosystem, as supporting evidence of depth in AI development. Citi also noted that Baidu’s chip subsidiary, Kunlunxin - majority-owned by Baidu - has initiated the process for a dual listing on the Shanghai STAR Market and in Hong Kong.
The bank’s selection of these three names comes against a sector backdrop that Citi described as having declined roughly 14% year-to-date, a dynamic the bank said may create more attractive entry points for selective investors looking for AI exposure in Chinese internet equities.
What this means for investors
Citi’s shortlist frames these three companies as differentiated ways to access AI: Tencent for agentic systems and embedded agents, Alibaba for comprehensive, full-stack capability and new chip and platform launches, and Baidu for infrastructure, model ecosystem depth and corporate actions linked to its chip unit. The bank’s view ties technical capability to valuation opportunity amid a broadly down market.