3 AI stocks that could beat Google and Microsoft

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I recently read an interesting book on AI called AI Superpowers: China, Silicon Valley, and the New World Order. Author Kai-Fu Lee argues in the book, which was first published in 2018, “If data is the new oil, then China is the new Saudi Arabia.”

Lee knows a lot about AI and China. He was born in Taiwan and now lives in Beijing. He’s been working in artificial intelligence for decades. Lee helped set up Microsoft’s research laboratory (MSFT -1.28%) based in China. He then led Google China, which is now a subsidiary of Alphabet (GOOG 1.17%) (GOOGL 1.34%), for several years before launching a venture capital firm focused on Chinese technology companies.

In AI Superpowers, Lee argues that Chinese companies could hold key advantages in developing AI. If he’s right, here are three AI stocks that could beat Alphabet and Microsoft.

1.Alibaba group

Alibaba Group (BABA -1.69%) is sometimes referred to as “the Chinese Amazon”. There are certainly many similarities between the two companies. Both are e-commerce leaders. Both have major cloud services units.

Like Amazon, Alibaba has incorporated AI throughout its e-commerce ecosystem. Every company has implemented AI-powered personal assistants and smart speakers. As with Amazon, Alibaba’s biggest AI opportunity is with its cloud hosting operations.

The Chinese company believes it is “uniquely positioned to develop large-scale commercial use of AI”. This vision is based in large part on Alibaba’s deep access to consumer experiences on its e-commerce and digital media platforms and the applications customers run on its cloud hosting platform.

Alibaba recently announced plans to implement a ChatGPT rival to OpenAI. CEO Daniel Zhang said that generative AI and cloud computing have led to “a technological breakthrough moment”.

The company is splitting into six separate businesses. AI-focused investors will likely want to pay close attention to Alibaba’s cloud intelligence group, which will include cloud and AI operations.

2. Baidu

Baidu (BIDU -3.00%) is sometimes called “the Google of China”. It has developed a very popular search engine. Also, like Google, the company has invested heavily in artificial intelligence.

There are not many companies in the world that offer a complete infrastructure to support AI applications, but Baidu is one of the few. The Chinese company makes AI chips, operates a cloud hosting platform, and has advanced AI software.

Baidu introduced its ChatGPT rival, ERNIE Bot, last month. Investors weren’t overly impressed with the demo of the new chatbot. However, it’s still just the first innings for Baidu’s AI generative efforts.

Meanwhile, the stock appears to be cheap compared to most AI leaders. Baidu’s shares are trading at just 14 times expected earnings.

3. TenCent Holdings

TenCent Holdings (TCEHY -1.88%) ranks as one of the largest video game companies in the world. Its games include Call of Duty Mobile and Dune Awakening. But Tencent has expanded beyond video games.

The company also operates live streaming services. He developed the instant messaging, social media and digital payment app WeChat and Weixin. With these and other products, TenCent generates significant revenue from online advertising and fintech.

TenCent already uses artificial intelligence in its operations, especially with its online advertising. It is investing heavily in building AI technologies, including a ChatGPT rival called HunyuanAide.

The Chinese technology company’s market capitalization is currently around $450 billion. With the AI ​​tailwinds behind us, TenCent could potentially be worth much more over the next decade and beyond.

A common risk

There is no guarantee that Alibaba, Baidu and TenCent shares will outperform Alphabet and Microsoft in the future. A common and significant risk for these stocks relates to the Chinese government.

Chinese regulators are proposing to require companies in the country to obtain government approval before launching AI technology. This could slow down Alibaba, Baidu and TenCent in launching new AI apps. Additionally, these companies’ perceived connections to the Chinese government could limit their growth potential in markets, including the U.S.

John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, serves on the board of directors of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Keith Speights has positions in Alphabet, Amazon.com and Microsoft. The Motley Fool has positions and recommends Alphabet, Amazon.com, Baidu, Microsoft and Tencent. The Motley Fool has a disclosure policy.

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