UBS: Chinese Internet Giants to Reap AI Profits in 2-3 Years

Despite short-term macroeconomic headwinds, Chinese internet platforms are positioned to capture a larger share of artificial intelligence profits within two to three years, according to UBS analysts. The caution among investors over aggressive AI spending by Chinese tech giants is expected to subside as the industry's power balance shifts. Kenneth Fong, head of China internet research at UBS, explained that currently, capacity constraints on the upstream segment allow those players to capture a significant portion of the profit pool. However, as these constraints ease, pricing power will move downstream to companies with distribution capabilities, data, and large user bases. Fong made these remarks on Tuesday at a UBS event in Shenzhen. In the past quarter, Chinese tech giants have increased capital expenditures to strengthen their AI capabilities, albeit at the expense of free cash flows. This strategic investment is anticipated to yield substantial returns as the AI market matures.