Tag: Inc. (BIDU)

Short-Term Gains vs. Long-Term Risks: Evaluating Chinese Stocks in Your Portfolio

Posted on by The INO.com Team

Over the past half-decade, China has implemented unpredictable and business-unfriendly policies, including the world's longest-lasting COVID-19 lockdown, making it a challenging environment for investment. A poll conducted at a Goldman Sachs conference in Hong Kong in early February indicated that over 40% of attendees considered China ‘uninvestable.’

Major companies like Apple Inc. (AAPL) and Samsung are also shifting their supply chains away from China, and many others are not planning future investments in this previously coveted market.

As the Chinese economy grapples with market weakness, the New York Times reported a shift in the government’s stance towards more business-friendly policies.

Moreover, JPMorgan analysts are optimistic about the continuation of positive China trading trends, predicting this momentum could extend through the summer. While longer-term structural concerns such as deflationary backdrop, excess capacity, real-estate demand-supply imbalances, credit saturation, and global decoupling persist, analysts believe the worst of the housing market weakness is over. And that should keep the rally going.

Last week, Alibaba Group Holding Limited (BABA), JD.com, Inc. (JD), and Baidu, Inc. (BIDU) released their quarterly results, revealing that growth, although modest, continues. Their management teams are effectively delivering on efficiencies and enhancing shareholder value.

BABA shares have gained more than 8% over the past five days, while JD saw marginal gains over the same period. Although down 4% in the past week, BIDU has logged nearly a 7% gain over the past month.

Meanwhile, the iShares MSCI China exchange-traded fund (MCHI) climbed 17% over the past month, outpacing the S&P 500, which rose nearly 7%.

Despite these gains, the question still lingers: is the rally short-lived? Let’s dig deeper.

Alibaba Group Holding Limited (BABA)

The Chinese e-commerce giant Alibaba Group Holding Limited (BABA) faced tough regulatory, macroeconomic, and competitive headwinds in the past. For the fourth quarter that ended March 31, 2024, BABA’s revenue increased by a modest 7% year-over-year to $30.73 billion. However, the company’s income from operations declined 3% from the prior-year quarter to $2.05 billion.

Alibaba has been navigating a period of cautious consumer spending in China, yet there have been signs of a slight recovery in its core e-commerce business. Revenue from the Taobao and Tmall Group rose 4% year-over-year to $12.91 billion.

Also, customer management revenue (including marketing services for merchants on Taobao and Tmall) increased 5% after being flat in the prior quarter, and revenue from the Alibaba International Digital Commerce Group (AIDC) surged 45% year-over-year to $3.80 billion.

CEO Eddie Wu's commitment to “reignite” growth through further investments showed early results in the March quarter, as he noted the strategies were “working and we are returning to growth.”

However, BABA’s net income plunged by 96% from the prior year’s quarter to $127.18 million, primarily due to a decline in the value of its holdings in other publicly traded companies. The company’s non-GAAP earnings per share fell 5% from the year-ago value to $0.18. Also, its adjusted EBITDA decreased by 5% year-over-year to $3.32 billion.

Analysts expect Alibaba’s revenue for the first quarter (ending June 2024) to increase 5.5% year-over-year to $34.22 billion. However, its EPS for the ongoing quarter is expected to decline by 15.2% year-over-year to $2.04. Further, for the fiscal year 2025, BABA’s revenue is forecasted to reach $140.52 billion (up 8% year-over-year), while the consensus EPS estimate of $8.25 indicates a 4.1% decline from the prior year.

In terms of forward non-GAAP P/E, BABA is trading at 10.74x, 31.9% lower than the industry average of 15.79x. Likewise, its forward EV/EBITDA and Price/Book multiples of 6.93 and 1.47 are 28.9% and 40.5% lower than the industry averages of 9.74 and 2.48, respectively. Attractive, isn’t it? But the question remains: why is this stock so cheap in the first place?

In response to its low valuation, Alibaba's management repurchased $4.8 billion worth of shares in the fourth quarter. Although buybacks can theoretically boost the value of remaining shares by reducing the number outstanding, they fail to tackle the fundamental reasons for Alibaba's low stock price.

Alibaba's diverse investments dilute its focus on core e-commerce and cloud businesses, impacting its efficiency and valuation in the long run. For instance, although the management reported triple-digit growth in AI-related revenue in the fourth quarter, the cloud computing division only expanded by 3% year-over-year to $3.55 billion.

The stock has gained over 28% over the past month and nearly 14% year-to-date. Despite these gains, many investors are wary of the unpredictable and hostile Chinese market, and Alibaba's sprawling conglomeration of disjointed businesses further diminishes its appeal. Plus, the company's AI prospects seem weak compared to U.S. competitors.

Given BABA’s mixed financial performance and uncertain near-term outlook, waiting for a better entry point in this stock seems prudent.

JD.com, Inc. (JD)

Headquartered in Beijing, JD.com, Inc. (JD) offers a wide range of products, including computers, communication devices, consumer electronics, home appliances, and general merchandise. It also provides online marketplace services for third-party merchants, marketing services, omnichannel retail solutions, and online healthcare services.

In the latest quarter, the Chinese online retailer saw accelerated growth in its topline and market share, complemented by a robust bottom line that exhibited healthy gains. As consumers have been gravitating toward low-cost, discount-focused platforms, the company’s strategic price cuts and discount coupons have boosted sales that have been hit by cautious consumer behavior.

JD’s CEO, Sandy Xu, highlighted strong performance in categories like general merchandise, electronics, home goods (especially mobile phones), and apparel. He added that improved price competitiveness resonated with users, accelerating growth in lower-tier cities faster than in higher-tier cities.

During the first quarter that ended March 31, 2024, JD’s net revenues increased 7% year-over-year to $36 billion, beating analysts’ estimate of $35.68 billion. Its income from operations grew 19.8% from the prior year’s quarter to $1.10 billion. Furthermore, non-GAAP net income attributable to the company’s ordinary shareholders came in at $1.20 billion and $0.78 per ADS, up 17.2% and 18.7% year-over-year, respectively.

Earlier this month, analysts expressed concerns about the impact of JD.com’s low-cost strategy on margins and profitability. However, CFO Ian Shan dismissed these worries, stating that increasing users and profitability simultaneously is not contradictory.

“We believe by constantly dedicating resources to product, price, and service, this improves user experience, which drives up GMV (gross merchandising volume) and market share,” forming a virtuous cycle of business enhancement and profit growth, Shan explained.

Looking at the balance sheet, JD.com holds more cash than debt, which indicates financial stability and potential for investment in growth opportunities. As of March 31, 2024, its cash and cash equivalents stood at $11.31 billion, and its total current assets were $39.34 billion. Also, JD’s free cash flow increased by 166.3% over the past 12 months, reaching $7.01 billion.

This strong cash position allowed the company to pay an annual dividend (yielding 2.19% at the current price level) for the year ended December 31, 2023, of $0.38 per ordinary share, or $0.76 per ADS, to its shareholders on April 23, 2024. JD's four-year average dividend yield is 1.24%, with a payout ratio of 23.45%.

Despite robust short-term performance, JD.com has been cautious with international expansion compared to its peers. For instance, it opted not to acquire the warehouse and store network of British electrical retailer Currys in March. However, with expectations of slowing domestic growth, the company might need to explore new overseas revenue streams to sustain its momentum.

In terms of forward non-GAAP P/E, JD is trading at 10.66x, 32.5% lower than the industry average of 15.79x. Similarly, its forward EV/Sales multiple of 0.30 is 75% lower than the industry average of 1.22. Also, the stock’s 0.33x forward Price/Sales compares to the 0.89x industry average.

Street expects JD’s revenue and EPS for the second quarter (ending June 2024) to increase 5.6% and 7.2% year-over-year to $41.69 billion and $0.79, respectively. Also, the company has topped the consensus EPS estimates in all four trailing quarters.

For the fiscal year 2024, the Chinese online retailer’s revenue and EPS are anticipated to grow 6.6% and 7.4% year-over-year to $160.66 billion and $3.31, respectively.

Shares of JD have surged more than 43% over the past three months and approximately 20% year-to-date.

Based on the company’s outlook, JD.com is focused on enhancing user experience and solidifying its market position for sustainable growth. This includes developing an ecosystem benefiting both first-party and third-party merchants. Additionally, the company’s shareholder-friendly actions, such as share repurchases and dividends, will likely bolster investor confidence and support the stock’s valuation.

Analyst Saiyi HE maintains a bullish outlook on the stock, with a price target of $51.90.

Considering these factors, along with JD.com's ongoing initiatives and potential for margin expansion, investors should closely monitor the company's performance throughout this year.

Baidu, Inc. (BIDU)

Baidu, Inc. (BIDU) operates as a Chinese-language Internet search provider with its headquarters in Beijing. Its Baidu.com platform enables users to discover online information. The company operates through two segments, Baidu Core and iQIYI.

Often called the "Google of China," Baidu is a prominent AI leader in the world’s second-largest economy. It not only develops AI tools but also supports the technology through its cloud computing infrastructure. Baidu launched the ERNIE bot, China's first public ChatGPT-like tool, and has a growing business in self-driving taxis.

For the first quarter that ended March 31, 2024, BIDU reported a marginal year-over-year increase in its revenues of $4.37 billion, slightly above Wall Street’s estimate of $4.34 billion. Its non-GAAP operating income rose 4% from the year-ago value to $924 million. Its non-GAAP net income came in at $971 million, up 22% year-over-year.

 Baidu’s focus on AI-driven advertisements and cloud services is expected to drive long-term growth despite potential short-term volatility in ad revenue due to the lower monetization of AI-generated search results. Moreover, AI significantly contributed to Baidu’s performance in the latest quarter. The core business, which includes online marketing and AI efforts, reported revenue ahead of analyst expectations, driven by a 6% annual growth in the AI Cloud segment.

“Baidu Core’s online marketing revenue remained stable, while the end-to-end optimization of our AI technology stack continued to propel the growth of our AI Cloud revenue during the quarter,” said Robin Li, Baidu’s CEO, in a statement.

The company’s non-GAAP earnings per ADS amounted to $2.76, a 23.7% increase from the prior year’s quarter. In addition, its adjusted EBITDA increased marginally year-over-year to $1.14 billion.

As of March 31, 2024, the company’s cash and cash equivalents were $4.21 billion, and its total current assets stood at $30.12 billion.

Rong Luo, Baidu’s Chief Financial Officer, stated, “In the coming quarters, we will execute on what is needed to optimize our operational efficiency in support of our AI enabled businesses and high-quality growth, and maintain a healthy non-GAAP operating margin.”

In terms of forward non-GAAP P/E, BIDU is currently trading at 9.87x, 28.7% lower than the industry average of 13.86x. Also, its forward EV/EBIT multiple of 8.61 is 42% lower than the industry average of 14.85x.

Analysts expect BIDU’s revenue for the second quarter (ending June 2024) to increase 3.1% year-over-year to $4.81 billion. However, its EPS for the current quarter is expected to decrease by 12.2% year-over-year to $2.71. Over the past month, the stock has gained more than 17% to close the last trading session at $108.87.

While the firm’s short-term gains are apparent, demonstrated by robust financial performance and stock price increases, there are looming risks, primarily due to potential fluctuations in ad revenue and the complexities of integrating generative AI capabilities.

Given this backdrop, investors should monitor BIDU's progress closely, especially its advancements in AI and cloud services, to evaluate the sustainability of its growth.

Top China Stock Picks to Buy Amid Economic Boom

Posted on by The INO.com Team

China's economy surged beyond projections at the start of 2024, with the Gross Domestic Product (GDP) escalating by 5.3% in the first quarter, an increase from the previous quarter's 5.2%, as the National Bureau of Statistics reported. The world's second-largest economy embraced a familiar strategy: significant investment in its manufacturing domain to invigorate growth.

This included a spree of new factories, propelling global sales of solar panels, electric vehicles, and various other products. Industrial production saw a 6.1% leap in the first quarter compared to the previous year, driven by robust expansion in high-tech manufacturing.

Notably, the production of 3D printing equipment, electric vehicle charging stations, and electronic components surged by approximately 40% year-on-year. Moreover, last month, the manufacturing purchasing managers' index (PMI) expanded for the first time in six months, while the Caixin/S&P PMI reached its highest level in over a year, buoyed by increased overseas demand.

That said, China has established an annual growth target of approximately 5% for 2024. Additionally, authorities have implemented interest rate cuts to stimulate bank lending and expedited central government spending to bolster infrastructure investment.

Given this backdrop, investors can leverage the economy's solid momentum by considering buying fundamentally robust Chinese stocks poised to deliver substantial returns.

PDD Holdings Inc. (PDD)

PDD Holdings Inc. (PDD), the e-commerce operator behind Pinduoduo and Temu, has rocked both the Chinese and U.S. e-commerce sectors with outstanding earnings and upbeat long-term prospects. The company primarily focuses on bringing businesses and people into the digital economy. Its market capitalization stands at $164.93 billion.

For the fourth quarter that ended December 31, 2023, PDD’s total revenues increased 123.2% year-over-year to $12.52 billion. Its non-GAAP operating profit rose 146% from the year-ago value to $3.46 billion. Its non-GAAP net income attributable to ordinary shareholders and non-GAAP earnings per ADS were $3.59 billion and $2.40, up 110.4% and 71.7% year-over-year, respectively.

Furthermore, cash inflows from operating activities for the quarter came in at $5.20 billion, an increase of 38.9% from the prior year’s quarter, primarily due to the surge in net income. Such financial prowess solidifies the company’s position in the market and sets a high bar for competitors.

Lei Chen, co-CEO of PDD, hailed 2023 as a “pivotal chapter,” attributing Pinduoduo's resilience in a sluggish Chinese economy and Temu’s burgeoning popularity in the U.S. to the company's strategic prowess. As Pinduoduo's affordable offerings resonate with value-conscious consumers amid economic uncertainties, the company's trajectory is becoming even more compelling.

Looking ahead, analysts expect PDD’s revenue to increase 97.8% year-over-year to $10.54 billion for the first quarter ended March 2024, and its EPS is expected to grow 47.8% year-over-year to $1.45. Moreover, the company has an impressive earnings surprise history as it surpassed consensus revenue and EPS estimates in all four trailing quarters.

Furthermore, for the fiscal year 2024, Street expects PDD’s revenue and EPS to increase 49.4% and 30.9% from the prior year to $51.37 billion and $8.45, respectively.

Baidu, Inc. (BIDU)

Baidu, Inc. (BIDU), a Chinese tech company specializing in Internet-related services, products, and artificial intelligence (AI), recently unveiled an array of cutting-edge AI models and toolkits. These advancements democratize AI development, empowering individuals of all skill levels to create transformative applications, a move poised to elevate BIDU's standing in the AI arena significantly.

One standout is ERNIE, BIDU's flagship AI model, renowned for its versatility across various applications. ERNIE Bot, a conversational AI bot built on this framework, has swiftly garnered 200 million users since its launch in March 2023, handling a staggering 200 million daily queries.

Baidu Comate, another innovation powered by ERNIE, has catalyzed innovation by contributing to 27% of new code within BIDU, serving over 10,000 companies, with an impressive 46% adoption rate. Additionally, Qianfan, BIDU AI Cloud's FM platform, has enabled over 85,000 enterprises to develop 190,000 AI applications, showcasing BIDU's wide-reaching impact in the industry.

BIDU's financial performance mirrors these technological triumphs. In the fourth quarter of fiscal 2023, the company’s revenue grew 5.7% year-over-year to $4.92 billion. Its non-GAAP operating income surged by 8.9% from the year-ago value to $996 million, and its non-GAAP net income experienced a 44.4% year-over-year growth, reaching $1.09 billion.

Moreover, BIDU’s adjusted EBITDA showed significant improvement, increasing by 10% year-over-year to $1.28 billion.

Analysts foresee a promising growth trajectory for BIDU. Wall Street expects the company’s revenue to increase 6.3% year-over-year to $19.87 billion for the fiscal year ending in December 2024, accompanied by an estimated EPS of $10.74. Furthermore, BIDU surpassed consensus EPS estimates in all four trailing quarters, which is remarkable.

For the fiscal year 2025, the company’s revenue and EPS are anticipated to grow 7.9% and 10% year-over-year to $21.43 billion and $11.82, respectively. These optimistic projections underscore BIDU's unwavering commitment to innovation and its potential for sustained success in the dynamic landscape of AI technology.

Baozun Inc. (BZUN)

Baozun Inc. (BZUN), a premier brand e-commerce solution provider and digital commerce enabler, has fortified omnichannel capabilities and expanded core product categories through high-level engagements. Collaborating with brand partners and key marketplaces, the company has crafted effective go-to-market strategies, acquiring over 50 new brands in 2023.

Implementing a new store concept transitioning from large-scale to boutique formats, BZUN enhances brand DNA and fosters immersive brand experiences beyond mere commercial transactions. In-store pop-ups and campaigns are further amplifying social engagement, enriching consumer experiences.

In addition, in January, the company authorized a new share repurchase program, allowing the repurchase of up to $20 million worth of outstanding American depositary shares (ADSs) and Class A ordinary shares over the ensuing 12 months, starting January 24, 2024.

During the fiscal 2023 fourth-quarter earnings call, BZUN unveiled the inauguration of 10 new stores, including a flagship in Guangzhou, alongside expansions in Shantou, Shenzhen, and Beijing. Notably, square meter efficiency surged 50% for newly opened stores, with existing ones witnessing a remarkable 19% spike in same-store sales.

For the fourth quarter that ended December 31, 2023, BZUN reported an 8.9% year-over-year surge in total net revenues to $391.61 million, marking a significant turnaround from the previous year's loss. The company posted an adjusted operating profit for E-Commerce of $16.60 million for the quarter.

Mr. Vincent Qiu, BZUN’s Chairman and CEO, said, “In 2023, we started our transformation journey, expanding into three business divisions. Throughout the year, we solidified our leadership in the digital commerce industry, and further enhanced operational efficiency. I am grateful for the resilience and adaptability demonstrated by the Baozun team amid the ever-changing market environment.”

“Looking ahead to 2024, despite macro uncertainties, we remain committed to sustainably executing our plans with diligence and patience. The improved health of our business fundamentals gives us confidence to enhance value proposition to our brand partners,” he added.

For the fiscal year ending December 2024, Street expects BZUN’s revenue to increase 3.2% year-over-year to $1.26 billion. Similarly, the company’s revenue for the fiscal year 2025 is estimated to grow 6.9% from the previous year to $1.35 billion.

Bottom Line

While U.S. stocks may offer stability in tumultuous times, diversifying into international stocks can yield significant benefits, especially in terms of portfolio risk management and solid returns. Financial advisors often advocate for familiarity with American companies, yet venturing into global markets, particularly China, can broaden investment horizons and unlock new opportunities.

This is because China is poised to reclaim its global significance, as per Bloomberg's analysis of IMF forecasts. Projections suggest China's economic resurgence will surpass the combined growth of the G-7 nations. China is anticipated to lead with an estimated 21% contribution to global economic growth from now through 2029.

In comparison, the G-7 nations are expected to contribute approximately 20%, while the U.S. falls short with 12%, nearly half of China's projected growth. Remarkably, 75% of global growth will originate from only 20 countries, with China, India, the U.S., and Indonesia accounting for over half of this expansion.

Investors can capitalize on this dynamic economic landscape by exploring fundamentally strong Chinese stocks poised for substantial returns. Among these, PDD, with its meteoric rise in e-commerce, BIDU, leveraging cutting-edge AI innovations, and BZUN, a leading brand e-commerce solution provider, stand out.

These stocks’ impressive financial performances, strategic initiatives, and optimistic growth projections make them compelling investment options for investors seeking exposure to the thriving Chinese economy.

4 China Tech Stocks to Get into BEFORE Mid-August Hits

Posted on by The INO.com Team

President Joe Biden plans to sign an executive order to curb critical U.S. technology investments in China by mid-August, according to people familiar with the internal deliberations. The order primarily focuses on semiconductors, artificial intelligence (AI), and quantum computing. It won’t affect any existing investments and will only prohibit certain new transactions.

These so-called outbound investment controls are part of a broader White House effort to limit China’s capabilities to develop next-generation technologies to dominate military and economic security. This includes steps to control the sales of advanced chips and the tools to build them.
The timing of the executive order has slipped multiple times before, and there is no assurance that it won’t be delayed again. However, internal discussions have already shifted from the substance of the measures to rolling out the order and accompanying rule, stated the people familiar who spoke anonymously.

The effort can complicate the Biden administration’s already troubled relations with China, which sees these restrictions as an effort to contain and isolate the nation. Earlier this month, China’s envoy in Washington said that Beijing would retaliate if the U.S. imposed new restrictions on tech or capital flows.

Meanwhile, Treasury Secretary Janet Yellen has tried to calm Chinese anger over the limitations, stating they wouldn’t considerably damage the ability to attract U.S. investment and were narrowly tailored.

“These would not be broad controls that would affect US investment broadly in China, or in my opinion, have a fundamental impact on affecting the investment climate for China,” Janet Yellen commented in an interview with Bloomberg Television.

4 China Tech Stocks to Buy Before Mid-August

JD.com, Inc. (JD) is a leading supply chain-based technology and service provider in the People’s Republic of China. It provides computers, communication, consumer electronics, home appliances, and general merchandise products.

The company provides online marketplace services for third-party merchants, marketing services, and omnichannel solutions to customers and offline retailers. Also, it offers integrated data, technology, business, and user management industry solutions to support the digitization of enterprises.

On July 21, JD Logistics (JDL) and Geopost entered a strategic partnership to strengthen their global logistics capabilities. By leveraging JDL’s solid warehousing network and Geopost’s logistics delivery capabilities, the collaboration would enhance international express services between China and Europe. This partnership should bode well for both companies.

Also, the same day, JD announced a partnership with French luxury group SMCP to launch Sandro, Maje, and Claudie Pierlot flagship stores. This launch should offer JD.com’s nearly 600 customers access to more than 4,000 high-end products from these top-tier brands. Beyond providing products, the partnership with SMCP extends into operations, marketing, and supply chain support.

On July 13, JD introduced ChatRhino large language model (LLM) on its 2023 JDDiscovery tech summit. Combining 70% generalized data with 30% native intelligent supply chain data, the company’s latest AI model provides targeted solutions for real industry challenges across sectors, including retail, logistics, finance, and health. JD’s ChatRhino also sets a new benchmark as a 100-billion-parameter model.

The company’s large language model evolution aligns with its relentless pursuit of technology, encircling the pillars of efficiency, user experience, cost-effectiveness, inclusiveness, and groundbreaking progress.

For the first quarter that ended March 31, 2023, JD’s net revenues were $35.40 billion, up 1.4% from the same period in 2022. Its net service revenues increased 34.5% from the year-ago value to $6.90 billion. The company’s non-GAAP income from operations was $1.10 billion, an increase of 68.1% year-over-year.

Furthermore, non-GAAP net income attributable to the company’s ordinary shareholders for the first quarter was $2.20 billion or $0.69 per ADS, up 90% and 88.1% year-over-year, respectively.

After witnessing strong growth in profitability in the first quarter of fiscal 2023, JD expects to continue its business momentum in the upcoming quarters.

“In the quarters ahead, we will further enhance our business structure in order to drive the expansion of our user base throughout China. JD.com has built China’s most trusted brand in retail, and is uniquely positioned to provide our loyal user base with the superior quality, value, speed and selection they have come to expect, while maintaining the flexibility to seize upon multiple growth opportunities across our businesses,” said Lei Xu, JD’s CEO.

Analysts expect JD’s revenue and EPS for the fiscal year (ending December 2023) to increase 2.9% and 18.4% year-over-year to $154.54 billion and $3.02, respectively. The consensus revenue and EPS estimates of $170.25 billion and $3.55 for the fiscal year 2024 indicate a growth of 10.2% and 17.9% year-over-year, respectively.

The second tech stock investors should consider buying is Baidu, Inc. (BIDU). The company provides internet search services in China. BIDU operates through Baidu Core and iQIYI segments. Its offerings include Baidu App, Baidu Search, Baidu Feed, Baidu Health, Haokan, Baidu Wiki, Baidu Experience, and Baidu Drive. Also, the company offers online marketing services.

On June 16, BIDU obtained licensing for the commercial operation of its fully driverless ride-hailing service in Shenzhen. With this new license, Baidu’s Apollo Go robotaxis would be allowed to operate across 188 square kilometers in Shenzhen from 7 a.m. to 10 p.m. daily. This expansion broadens the scope of BIDU’s commercial, fully driverless ride-hailing service operations nationwide.

On May 4, BIDU Research developed a groundbreaking AI algorithm that significantly drives the stability and antibody response of Covid-19 mRNA vaccines. Such algorithm designs could enhance BIDU’s AI capabilities and provide a competitive edge, boosting the company’s revenue through licensing or commercializing the technology.

Also, on March 16, BIDU launched ERNIE Bot, a next-generation large language model with impressive capabilities in Chinese language and culture comprehension, literary and business writing, mathematical calculations, and multi-modal content creation. By leveraging cutting-edge technology to enhance its products and services, BIDU positions itself for long-term, sustainable growth.

BIDU’s revenues increased 9.6% year-over-year to $4.54 billion during the first quarter that ended March 31, 2023. Its non-GAAP operating income rose 60.9% from the prior-year quarter to $936 million. The company’s adjusted EBITDA grew 48.1% from the year-ago value to $1.19 billion.

In addition, non-GAAP net income to BIDU increased 47.6% year-over-year to $834 million, and its non-GAAP earnings per ADS were $2.34, up 43.5% year-over-year.

According to Rong Luo, CFO of BIDU, “Generative AI represents a new paradigm shift in AI, and Baidu is poised to take advantage of this massive market opportunity. Baidu will continue to invest unwaveringly in this area in the coming quarters.”

Street expects BIDU’s revenue to increase 8.5% year-over-year to $4.65 billion for the second quarter ended June 2023. Likewise, the consensus EPS estimate of $2.39 for the same period indicates a 4.5% year-over-year rise. Also, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

Furthermore, BIDU’s revenue and EPS for the current fiscal year 2023 are expected to grow 6.4% and 12.6% from the previous year to $19.10 billion and $9.63, respectively.

Another prominent Chinese tech stock, NIO Inc. (NIO), should be added to one’s portfolio before mid-August hits. The company is a pioneer and a leading company in the premium smart EV market. It provides five and six-seater electric SUVs and smart electric sedans. Also, NIO offers power solutions such as Power Home, Power Swap, Power Charger, Power Mobile, and Power Map.

On July 12, NIO closed the $738.50 million strategic equity investment from CYVN Investments RSC Ltd, an affiliate of CYVN Holdings L.L.C., an investment vehicle majority owned by the Abu Dhabi Government with a strategic focus on advanced and smart mobility.

After the Investment Transaction and the Secondary Share Transfer, CYVN Investments RSC Ltd owns nearly 7% of the company’s total issued and outstanding shares. NIO and CYVN Entities will work jointly to pursue strategic collaborations in international business and technology cooperation.

On July 1, the company announced its June and second quarter 2023 delivery results. NIO delivered 10,707 vehicles in June. The deliveries comprised 6,383 premium smart electric SUVs and 4,324 premium smart electric sedans. It delivered 23,520 vehicles in the second quarter of 2023. As of June 30, 2023, cumulative deliveries of NIO vehicles reached 344,117.

On June 15, NIO launched the ET5 Touring, a smart electric tourer, and started its deliveries the following day. Designed for family users, the ET5 Touring is crafted with versatile space and inherits the exquisite and dynamic design, high-performance genes, and advanced intelligent features of its sedan variant ET5.

Also, the company commenced delivery ramp-up of the All-New ES8, a smart electric flagship SUV, on June 28, 2023.

During the first quarter of 2023, NIO’s revenues were $1.55 billion, an increase of 7.7% from the first quarter of 2022. The company’s other sales increased 117.8% from the previous year’s quarter to $211.40 million. The increase in other sales was mainly due to the increase in sales of accessories, provision of power solutions, provision of auto financing services, and sales of used cars.

For the fiscal year (ending December 2023), NIO’s revenue is estimated to increase 28.2% year-over-year to $9.20 billion. In addition, analysts expect the company’s revenue for the fiscal year 2024 to grow 48.9% year-over-year to $13.69 billion.

Tech stock Bilibili Inc. (BILI)could also be an ideal buy before the Biden government signs the executive order. BILI provides online entertainment services for the young generations. The company’s platform offers a wide range of content, including video services, mobile games and value-added services, and ACG-related comic and audio content.

For the first quarter that ended March 31, 2023, BILI’s net revenues were $738.20 million, a marginal increase from the same period of 2022. Its revenues from value-added services (VAS) grew 5% from the year-ago value to $314 million, and revenues from advertising were $185.20 million, up 22% year-over-year, primarily attributable to the company’s improved advertising product offering and enhanced advertising efficiency.

BILI’s gross profit for the first quarter increased 37% year-over-year to $160 million, mainly due to reduced revenue-sharing and server and bandwidth costs. As of March 31, 2023, the company had cash and cash equivalents, time deposits, and short-term investments of $2.80 billion.

As indicated by its latest financial results, the company started the first quarter of fiscal 2023 on a positive note, with a notable improvement in its gross profit. Furthermore, BILI will continue prioritizing profitability while fostering a vibrant and highly engaged community for its users and creators in the upcoming quarters.

Analysts expect BILI’s revenue for the third and fourth quarters of 2023 to increase 12.3% and 10.8% year-over-year to $908.37 million and $984.70 million, respectively. Also, the company’s revenue for the fiscal year 2024 is expected to grow 16.8% from the prior year to $3.95 billion.

Shopify (SHOP) Unveils HOT AI Chatbot: Is it a 'Must' Buy?

Posted on by The INO.com Team

On July 12, Canada-based e-commerce company Shopify Inc. (SHOP) unveiled its artificial intelligence (AI) assistant designed to help merchants with questions, thereby becoming the latest in the string of companies to implement such a feature.

The assistant, Sidekick, would be embedded as a button on the platform that can complete tasks for merchants and answer specific questions about their business, including queries on sales and order trends within a store. Illustrating the features through a video on Twitter, SHOP CEO said that the AI feature is “coming soon.”

Since the announcement, SHOP’s stock has gained about 6.9%, compared to a 2.9% rise during the month prior, at par with the S&P 500. However, is the feature worth the hype? Let’s find out.

AI is an umbrella term that is used to denote a series of programs and algorithms designed to mimic human intelligence and perform cognitive tasks efficiently with little to no human intervention.
However, unlike other next-big things, AI has been around for quite some time, influencing how we shop, drive, date, entertain ourselves, manage our finances, take care of our health, and much more.

However, the technology came into the limelight late last year with the release of ChatGPT, which in its own description, is “an AI-powered chatbot developed by OpenAI, based on the GPT (Generative Pretrained Transformer) language model. It uses deep learning techniques to generate human-like responses to text inputs in a conversational manner.”

The easily accessible chatbot that took the world by storm is one of the several use cases of generative AI, the subset of algorithms that creates and returns content, such as human-like text, images, and videos, based on the user's written instructions (prompts).

Including this subset, AI in its various forms and applications can analyze large volumes of data generated during the entire course of our increasingly digital existence and identify trends and exceptions to help us develop better insights and make more effective decisions.

Given its massive importance, it’s hardly surprising that Zion Market Research forecasts the global AI industry to grow to $422.37 billion by 2028. Hence, this field has understandably garnered massive attention from investors who are reluctant to miss the bus on such a watershed development in the history of humankind.

The Catch

Notwithstanding all the transformative qualities of AI, investors in SHOP would be wise to be aware of the caveats before FOMO drives them to buy like there’s no tomorrow and inflate a "baby bubble" growing in plain sight.

Microsoft Corporation (MSFT) has bet big on the technology by announcing a multiyear, multibillion-dollar investment deal with Open AI. MSFT’s rival, Alphabet Inc. (GOOGL), is in hot pursuit. With ubiquitous AI-enabled technology across its platforms, the company has unveiled its response to ChatGPT, called BardAI.

Chinese tech giant Baidu, Inc. (BIDU) has also followed suit with Ernie Bot. Amazon.com, Inc. (AMZN) and Meta Platforms, Inc. (META) are also among the notable players in this dynamic domain. Alibaba Group Holding Limited (BABA), Zoom Video Communications, Inc. (ZM), and Databricks have all crowded this space with their own offerings.

Hence, while the technology is powerful (and useful, unlike most cryptocurrencies), the adoption is fast becoming so widespread that it remains unclear how it could help a specific business differentiate itself by developing enduring competitive advantages (read moats) and generating consistent profitability.

While AI is really good (and continually getting better) at predicting based on available data, it lacks contextual understanding. Since, in the words of Morgan Housel, 'things that have never happened before happen all the time,' it could be challenging for any AI tool to deal with tails, exceptions, and outliers in the shifting sands of business, economy, and society.

Even AAPL co-founder Steve Wozniak, who knows more than a thing or two about technology, agrees with the ‘A’ and not the ‘I’ of Artificial Intelligence.

Stick to Basics

Just as we have learned during the dot-com, cryptocurrency, real estate, and numerous other bubbles through the ages, markets can stay irrational longer than investors can stay solvent.

Therefore, even if the next big thing comes along and changes the world (and electricity, automobiles, personal computers, and the Internet really did), it is fundamentals that determine whether a business can survive to capitalize on those windfalls.

With inflation and rising interest rates expected to keep weighing on consumer spending, SHOP’s core activities in a softening market have been facing unrelenting pressure from competition on both livestream shopping and logistics fronts.

However, in a strategic U-turn, SHOP sold its logistics unit, which it had spent years building out, including last-mile delivery startup Deliverr, its largest acquisition ever, to supply chain technology company Flexport. Moreover, on May 4, SHOP announced that it would be laying off 20% of its workforce in addition to the 10% it let go last July.

Bottomline

Rather than getting too carried away and stretching an improvisation that keeps the business at par with the competition to frothy excesses with unrealistic expectations, it would be wise for investors to evaluate SHOP based on its fundamentals and prospects.

Is AI Fueling the Next Tech Bubble? 5 Stocks to Watch

Posted on by The INO.com Team

Artificial Intelligence (AI) is an umbrella term that denotes a series of programs and algorithms designed to mimic human intelligence and perform cognitive tasks efficiently with little to no human intervention. Reinforcement through Machine Learning (ML) changes the game by enabling the models and algorithms to keep evolving based on outcomes.

Unlike other next-big things, such as nuclear fusion, quantum computing, and flying cars, which are practically (and literally) pies in the sky, AI has been around for quite some time, influencing how we shop, drive, date, entertain ourselves, manage our finances, take care of our health, and much more.
However, the technology came into the limelight late last year with the release of ChatGPT, which in its own description, is “an AI-powered chatbot developed by OpenAI, based on the GPT (Generative Pretrained Transformer) language model. It uses deep learning techniques to generate human-like responses to text inputs in a conversational manner.”

The Euphoria

The easily accessible chatbot, believed to be capable of eventually disrupting how humans interact with computers and changing how information is retrieved, took the world by storm by signing up 1 million users in five days and amassing 100 million monthly active users only two months into its launch. To put this in context, TikTok, the erstwhile fastest-growing app, took nine months to reach 100 million users.

ChatGPT is one of the several use cases of generative AI, the subset of algorithms that creates and returns content, such as human-like text, images, and videos, on the basis of written instructions (prompts) provided by the user.

Including this subset, AI in its various forms and applications is capable of analyzing large volumes of data generated during the entire course of our increasingly digital existence and identifying trends and exceptions to help us develop better insights and make more effective decisions.
Given its massive importance, it’s hardly surprising that Zion Market Research forecasts the global AI industry to grow to $422.37 billion by 2028. Hence, this field has understandably garnered massive attention from investors who are reluctant to miss the bus on such a watershed development in the history of humankind.

Although OpenAI, the creator of ChatGPT, is not a publicly listed company, Microsoft Corporation (MSFT) has bet big on the company with a multiyear, multibillion-dollar investment deal. CEO Satya Nadella discussed, at the World Economic Forum held in Davos this year, how the underlying technology would eventually be ubiquitous across MSFT’s products. The process has already begun with updates to its Bing search engine.

MSFT’s rival, Alphabet Inc. (GOOGL), is in hot pursuit. With AI-enabled technology ubiquitous across its platforms, the company has unveiled its response to ChatGPT, called BardAI, with which the company is eager to reclaim its reputation as an early bird in the domain of conversational AI.

Chinese tech giant Baidu, Inc. (BIDU) has also followed suit with Ernie Bot. Amazon.com, Inc. (AMZN) and Meta Platforms, Inc. (META) are also among the notable players in this dynamic domain.

However, more recently, the company which made headlines when its stock got its moonshot due to the widespread public interest in AI is NVIDIA Corporation (NVDA). Post its earnings release on May 24, the Santa Clara-based graphics chip maker has stolen the thunder by becoming the first semiconductor company to hit, albeit briefly, a valuation of $1 trillion.

NVDA’s A100 chips, which are powering LLMs like ChatGPT, have become indispensable for Silicon Valley tech giants. To put things into context, the supercomputer behind OpenAI’s ChatGPT needed 10,000 of Nvidia’s famous chips. With each chip costing $10,000, a single algorithm that’s fast becoming ubiquitous is powered by semiconductors worth $100 million.

The Catch

Notwithstanding all the transformative qualities of AI, investors, who poured a record $8.5 billion of cash into tech funds last week, would be wise to be aware of the limitations and loopholes of investing in technology before FOMO drives them to inflate a "baby bubble" growing in plain sight.

While the technology is powerful (and useful, unlike most cryptocurrencies), the adoption is fast becoming so widespread that it remains unclear how it could help a specific business differentiate itself by developing enduring competitive advantages (read moats) and generating consistent profitability.
Moreover, LLM-based generative AI chatbots such as ChatGPT and BardAI are simply auto-complete on steroids that have been trained on a vast amount of data. While they are really good (and continually getting better) at predicting what the next word is going to be and extrapolating it to generate extensive literature, it lacks contextual understanding.

Consequently, the algorithms struggle with nuances such as sarcasm, irony, satire, analogies, etc. This also leads to the propensity to “hallucinate” and generate responses even if those are factually and logically incorrect.

Additionally, with the widespread adoption of LLMs and other forms of generative AI, a massive amount of content will be ingested and regurgitated as canned responses echoed in infinite permutations and combinations. This oversupply could dilute the value and increase demand for qualitatively superior insight and discernment, which (still) requires human intervention.

(Relatively) Safe Havens

Just as we have learned during the dot-com, cryptocurrency, real estate, and numerous other bubbles through the ages, markets can stay irrational longer than investors can stay solvent.

Therefore, even if the next big thing comes along and changes the world (and electricity, automobiles, personal computers, and the Internet really did), it’s the fundamentals that determine whether a business can survive to capitalize on those windfalls.

Hence, it could be wise and safe for investors to stick to big tech mega caps (mentioned earlier in the article), which are involved in providing the infrastructure and computing horsepower required to make the data and power-hungry AI algorithms work.

Moreover, since AI is well-embedded into their business operations and market offerings and AI as a service is (still) a small portion of their revenue, concentration risks can be more easily managed.

Bottom Line

Rather than getting too carried away and stretching a worthwhile and useful innovation to frothy excesses with unrealistic expectations, it could be useful to remember that legendary investor and polymath Charlie Munger doesn’t think that AI is the silver bullet that can solve mankind’s pressing problems all by itself.

Even AAPL co-founder Steve Wozniak, who knows more than a thing or two about technology, agrees with the ‘A’ and not the ‘I’ of Artificial Intelligence.
We hope this discourse will help investors cultivate discernment, discretion, and, if necessary, dissent while investing in this revolutionary technology since those are the ultimate indicators of intelligence.