The advent of generative AI technologies like ChatGPT has captured global attention, igniting imaginations about the profound ways they could reshape content creation, search, gaming, recommendations, advertising, and E-Commerce. While enablers such as OpenAI and Nvidia have seen their valuations skyrocket, and U.S. internet companies are viewed as prime beneficiaries, many investors may be overlooking the potentially disruptive impact this technological force could have on China’s internet giants and the vast ecosystem they operate in.

In this edition’s theme highlight, we analyze the many ways China internet companies are already implementing generative AI and the technology’s potential revenue impact.

China Internet Recent Highlights:

• Many leading China internet companies beat analyst estimates in their Q4 earnings, reflecting increased consumer activity surrounding the 11/11 festival as well as strong demand for travel booking and other services heading into the Lunar (Chinese) New Year holiday.
• China Internet companies currently trade at, on average, a -40% discounted earnings multiple compared to their US-based peers. As such, many continue to repurchase shares and KWEB’s top 10 holdings have an average buyback yield that is nearly 6%.¹
• Two new companies joined the KWEB portfolio this quarter: YSB Inc. and Fenbi. YSB is an online pharmacy and Fenbi provides vocational training and examinations. Check out our Subsector Analysis to learn more about these exciting companies.

China Internet Sector Earnings Report Contents:

• China Internet Sector recent Highlights
• Subsector Analysis
• Theme Highlight – Can Generative AI be the Next Transformative Force for China’s Internet Giants?
• KWEB Top 10 Holdings Earnings Update

1. Data from Bloomberg as of 3/28/2024. Buyback yield reflects the potential impact of current share repurchase programs being carried out. It is expressed as the value of the remaining share repurchases as a percentage of the company’s market capitalization.