In the age of AI, hardware is crucial. Large language models (LLMs) and other AI systems demand extreme amounts of computing power. Seemingly, the only limitation to their development is the quantity and quality of the chips that they can access. That is why some internet giants in China have chosen to launch their own chip design units.

Facing an uncertain supply of high-end chips due to US export restrictions under the Biden administration, top KWEB holdings Alibaba and Baidu invested heavily in their own chip design capabilities. Today, these ventures have the potential to help them unlock significant shareholder value.

China Internet Recent Highlights:

• China’s total retail sales increased 3.7% in 2025, while online retail sales increased 8.6%.¹
• In its fourth quarter earnings, Alibaba said its chipmaking unit T-Head is projected to generate approximately RMB 10 billion in revenue annually, which is more than Cambricon, a leading China-based fabless chipmaker.
• KWEB’s holdings only trade at 16 times earnings per share, on average, compared to 28 times earnings per share for US internet companies.²

China Internet Sector Earnings Report Contents:

• China Internet Sector Recent Highlights
• Subsector Analysis
• Theme Highlight – Can Chip Design Help Baidu & Alibaba Unlock Shareholder Value?
• KWEB Top 10 Holdings Earnings Update

For KWEB top 10 holdings, risks, and other Fund information, please click here.

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Citations:

1. Data from the National Bureau of Statistics as of 12/31/2025.
2. Data from FactSet as of 3/10/2026. China Internet is represented by the holdings of KWEB. US Internet is represented by the Dow Jones US Internet composite Index. Please see below for definitions.

Definition:

Dow Jones US Internet Composite Index: The Dow Jones US Internet Composite Index is designed to measure the performance of the 40 largest and most actively traded stocks of U.S. companies in the internet industry. To be eligible for the index, a company must derive at least 50% of cash flows from the
internet. The index was launched on February 18, 1999.

KWEB Top 10 Holdings as of 3/31/2026:

1. Tencent (10.09%)
2. Alibaba (8.93%)
3. PDD Holdings (8.78%)
4. Meituan (7.36%)
5. NetEase (5.91%)
6. JD.com (4.91%)
7. KE Holdings (4.34%)
8. Baidu (4.28%)
9. JD Health (4.01%)
10. Full Truck Alliance (3.59%)