China Internet Earnings Season Tests AI Sector Rotation
Nashnova编辑部
Tencent, JD.com, and SMIC report this week, directly testing whether the rotation from AI-infrastructure stocks into internet platforms that began in late June can hold — this earnings batch may set the tone for the second half.
Why is money flowing from chip stocks into internet names?
Since early July, JD.com and Alibaba have become the top-performing Hang Seng constituents, after both lagged the index in the first half.
SMIC has moved in the opposite direction — capital is leaving the chip end and entering the platform end.
This means → the market is repricing: investors now see platforms that monetize AI as a better near-term bet than companies that build AI's underlying hardware.
Can internet companies actually deliver the earnings?
HSBC expects JD.com's Q2 non-GAAP net profit to rise 18% year-on-year to RMB 8.7 billion (roughly $1.29 billion), driven by a sharp narrowing of food-delivery losses.
Citi analysts say Meituan may slightly beat expectations — lower subsidy intensity is shrinking losses faster than the market assumed.
In plain terms = these internet stocks are not rallying on "AI narratives" — they are rallying because core businesses are stanching losses and profits are genuinely improving.
Will every internet stock benefit equally?
Song Zhe, senior investment specialist at BNP Paribas Asset Management, warns: the market will reward companies that convert spending into earnings and defend margins, not those that merely announce bigger capex budgets.
This means → "spending big on AI" earns no premium by itself — spending big and then earning it back is what counts. Divergence among internet stocks is inevitable.
How much pressure is SMIC facing?
Bloomberg Intelligence flags uncertainty over whether SMIC's Q2 gross margin can reach its own guidance of 20%–22%, though revenue is expected to grow 14%–16% quarter-on-quarter.
Investors will focus on Q3 guidance to judge whether margin improvement and recent price hikes can hold.
This reflects a shift in the core question for chip stocks — not "can they sell?" but "how much do they earn after selling?"
What would send money back into chip stocks?
Gary Tan, portfolio manager at Allspring Global Investments, notes: if internet companies signal heavier investment while their core consumer outlook softens, semiconductor stocks could reclaim market leadership.
In plain terms = if platform companies keep spending but can't earn, investors will pivot back to chip stocks — at least the AI-infrastructure growth thesis is still intact.
This means → this week's earnings are not just single-stock events — they are the moment that may set the sector-rotation direction for the second half.
Content is for reference only, not financial advice.