Alibaba and Tencent Lead Massive Investment Cutbacks Among Chinese Tech Giants

In 2023, China’s leading internet companies, including Alibaba Group Holding Ltd BABA, Tencent Holdings Ltd TCEHY, and Baidu Inc BIDU, significantly reduced their external investments. 

This cutback, nearly 40% to 102 deals, was driven by the economic slowdown, regulatory challenges, and geopolitical tensions. 

Data from ITJuzi highlights that Tencent, a major player in China’s internet sector, saw the most substantial decrease in investment deals, dropping to 39 from 95 and 299 deals in 2022 and 2021, respectively, SCMP reports.

Baidu’s investment deals declined to 24 from 52 in 2021, while Alibaba participated in 39 deals, a significant drop from 91 in 2021. 

This reduction in investments comes after a period of regulatory tightening in China, which began in 2021 to control the “disorderly expansion of capital,” causing these internet giants to halt their aggressive expansion strategies.

Tencent’s investments in 2023 mainly focused on corporate services, healthcare, and video games.

In contrast, dealing with weak consumer spending at home, Alibaba targeted advanced manufacturing and made four investments in the e-commerce sector, including three outside China. 

Both companies also invested in AI startups, particularly those developing large language models (LLMs) similar to OpenAI’s ChatGPT.

At CES 2024 in Las Vegas, Alibaba and ByteDance’s TikTok showcased their latest technological advancements, focusing on AI and live-streaming e-commerce. 

Alibaba.com introduced its Smart Assistant, an AI-powered chatbot designed to help users navigate its sourcing website. 

This feature, embedded in the platform, utilizes various LLMs, including Alibaba’s own Tongyi Qianwen, to enhance the sourcing experience for businesses, SCMP reports.

In contrast, TikTok, known for its addictive short video service, focused on live-streaming e-commerce at its booth. 

The platform’s Chinese version, Douyin, has already succeeded in this area, and TikTok Shop aims to replicate this model internationally. 

Alibaba stock lost 38% in stock value last year, contributing to a broader fall in Hong Kong stocks to a nearly two-week low. 

This downturn in the market is attributed to concerns about China’s economic growth and diminishing expectations for immediate U.S. interest rate cuts. Other major technology companies like JD.com Inc JD, Baidu, Xiaomi Corp, and Lenovo Group also faced similar declines. This negative trend is partially due to reports of China’s manufacturing sector contracting for the third consecutive month.

Price Action: BABA shares are trading lower by 2.00% at $70.40 premarket on the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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