China’s AI models may be becoming the new global stars. Certain US and global technology firms have reported using lower-cost, China-developed large language models (LLMs) for certain applications.

We believe this development could significantly benefit China’s internet sector by providing AI leaders, including KWEB holdings Minimax, Z.ai, Alibaba, and Tencent, with a stable and diversified revenue stream. It may also lead global markets to recognize these firms for the central roles they play not only in China’s AI ecosystem but also in AI development globally. Meanwhile, China-based models may benefit from increasing pricing power, while US-based models may become less profitable if they must lower prices, in our opinion.

China Internet Recent Highlights:

• Kuaishou is planning to spin off its video generation large language model, Kling AI, through a Hong Kong IPO and raise $2 billion in funding, at a $20 billion valuation.¹
• KWEB has expanded the scope of its portfolio to include new categories of internet companies, including large language model (LLM) providers like Minimax, data center operators like GDS Holdings, and enterprise cloud firms like Kingdee International, following a change to its index methodology. We believe these additions reflect the evolution of web-based businesses globally in recent years and mean that KWEB will fully represent AI-enabled internet development in China.
• In this edition’s theme highlight, we examine the growing trend of global businesses diversifying the AI models they use with more cost-effective, open-weight, China-developed models and what this means for investors and China’s internet sector.

China Internet Sector Earnings Report Contents:

• China Internet Sector Recent Highlights
• Subsector Analysis
• Theme Highlight – Are China’s AI Models The New Global Stars?
• KWEB Top 10 Holdings Earnings Update

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

Citation:

1. Deng, Iris. “Kuaishou shares soar as Kling AI eyes US$20 billion valuation in potential spin-off,” South China Morning Post. May 12, 2026.

KWEB Top 10 Holdings & Weights as of 6/30/2026:

1. Tencent (10..44%)
2. PDD Holdings (7.92%)
3. Alibaba (7.70%)
4. NetEase (6.97%)
5. Meituan (6.83%)
6. Baidu (4.19%)
7. Full Truck Alliance (4.15%)
8. Kuaishou (4.08%)
9. KE Holdings (3.89%)
10. JD.com (3.88%)