A swarm of activity, is the revaluation of Chinese concept stocks facing a setback or a welcome surprise?

Hello everyone, I am Dolphin Research!

Since the beginning of 2025, discussions about the gap in asset trends between China and the U.S. and the hollowing out of American manufacturing seem to have reignited the narrative of "the East rising and the West declining."

So far this year, Chinese concept technology assets have averaged a 30% rebound, with 23 percentage points contributed by valuation expansion. This week we will once again enter the peak reporting week for Chinese concept stocks, and the urgent question is: How much room is left for the rise of Chinese assets? Will this peak reporting week for Chinese concept stocks bring a "cold water" moment to the recent capital revaluation, or will it be a "gas station" moment?

1. Either have AI or have performance; undervaluation is a commonality

Looking back at the Chinese concept assets that have reported earnings, there are two characteristics of those that are currently declining:

1) Declining group: Weak fundamentals cannot tell an AI story, either unrelated to AI, focusing on marginal changes in consumption

a. Similar to Li Auto and Baidu, these companies have weak fundamentals and marginal outlooks, and they do not have a coherent story regarding AI. For example, Li Auto's 2025 is essentially a small year for new car releases, with worsening competition in the hybrid SUV market. Baidu, in this round of AI, is still in the automotive intelligence sector, essentially in a state of "getting up early but arriving late," with a sunset state.

b. Similar to Trip.com and JD.com: These two are unrelated to AI, previously having high increases, one due to the high prosperity of the segmented service consumption track, and the other fortunate to encounter national subsidies in the worst segment of physical consumption (3C and electronic products).

However, both have overall weak future outlooks, especially Trip.com's EPS improvement progress directly guiding a downward marginal change, which almost "kills" the company's stock price.

2) Rising group: Assets in the eye of the AI storm; or have performance

a. Similar to Alibaba and SMIC: These are core assets in the story of the revaluation of Chinese technology assets. Both companies do not have outstanding performance in essence. Alibaba aligns with the asset market's expectations during the conference call, with a very smooth AI narrative logic and implementation; while SMIC combines AI narrative with the logic of domestic substitution under escalating trade disputes.

b. Leapmotor, Luckin Coffee, Boss Zhipin: They are largely unrelated to AI. Boss Zhipin mainly benefits from the logic of market share increase without breaking, with market expectations improving, and its valuation is still acceptable; Leapmotor and Luckin Coffee have both delivered good results in their respective fields.

In summary, those that can enjoy continuous revaluation, under the condition of low valuation, can expect performance landing brought by AI; while those unrelated to AI need to consider their product cycles and changes in consumer expectations, which are more related to fundamentals.

This part can be divided into two categories: one is the upward industry position and increased market share, but the industry itself is not very prosperous—such as Boss ZhiPin; the other can achieve better-than-expected performance in a sluggish consumption environment.

II. Crazy Earnings Week for Chinese Concept Stocks: A "Cold Water" Moment for Capital Revaluation or a "Gas Station" Moment?

With this mindset, we can introduce the companies reporting earnings this week, which Dolphin Research also divides into two categories:

a. AI-related: Tencent

Whether the computing power serves its own business or provides external services, Tencent is the main focus here. Currently, Tencent's entire product line is integrated with DeepSeek, and Yuanbao is spending heavily on user acquisition, which may indicate: a. Tencent has sufficient computing power preparation; b. After integrating with DS, Tencent believes AI has the potential to be a C entry point and is starting to spend heavily to compete for this entry.

We can pay attention to Tencent's capital investment plans in AI, especially after Alibaba has publicly expressed large capital expenditures, whether Tencent can set an example in driving the industrial chain, and how its capital expenditures affect the upstream computing power chain; at the same time, we can focus on whether user stickiness can improve under the AI enhancement of its products during the conference call, and whether it can break out of the Meta Reels story logic, especially since Tencent's recommendation system has always been relatively weak.

b. Low correlation with AI, strong correlation with large consumption

Platform Economy: Pinduoduo, Meituan, Beike, Tencent Music; among these, pay special attention to the narrative logic changes of Pinduoduo and Meituan.

Pinduoduo: The fourth-quarter performance may not be particularly noteworthy, especially in the first half of the national subsidy, which was slow to respond and required self-funding;

After the impact of Temu's U.S. tariffs, Pinduoduo holds a large amount of cash. How to efficiently allocate funds and whether to consider dividends or buybacks can be a key focus. If there is a narrative reversal, it may benefit valuation improvement;

Meituan: To some extent, in contrast to Pinduoduo, it has begun to vigorously open up overseas expansion modes, and new business losses may further increase. At the same time, with the social security of riders being opened up by peers like JD.com, Meituan may also face certain pressures, overall leaning towards a bearish outlook.

Beike: As a niche player with a small but beautiful vertical, following the logic of increasing market share, it is comparable to Boss ZhiPin. Boss has risen while Beike remains relatively flat, mainly because the market's expectations for the recruitment market have improved, while real estate needs to look at actual weekly sales and stabilization of transaction prices, and currently, the inflection point in real estate is not obvious. Therefore, Beike still has revaluation opportunities under the stabilization of real estate.

General Consumer Goods: Anta, China Resources Beer; the overall performance of consumer goods should be fully anticipated, and currently, there is not much opportunity for further valuation cuts. After the release of negative factors in the fourth quarter, it may instead benefit the revaluation process.

Electric Consumption: Xiaomi, XPeng, ZEEKR, Nio. These four are companies driven by strong product cycles and subsidy cycles among electric products. Xiaomi and XPeng currently have relatively high valuations, but short-term certainty remains strong, and the possibility of a surge cannot be ruled out currently, from the overall valuation level of Chinese concept assets, if the U.S. follows a mild recession logic, there is still room for revaluation of Chinese concept assets, and the valuation of Hong Kong stocks has not yet caught up with that of their emerging market peers. This week, Tencent continued the narrative of capital expenditure, and the narrative around Chinese AI still has ongoing potential. Of course, further efforts, as previously mentioned by Dolphin Research, require observing the spread of asset revaluation across sectors, gradually moving from technology to a broader internet scope. In the past couple of days, driven by a series of consumer policies implemented after the Two Sessions, there has been a slight trend of spreading, but the recovery in consumption remains very slow (see January and February Retail Sales Review), and the market revaluation is also very hesitant.

3. What is the external environment for the revaluation of Chinese concept stocks?

The ideal external environment for the revaluation of Chinese concept stocks is: stable economic policies in China with expectations of gradual recovery, while the U.S. economy is marginally declining rather than experiencing a rapid recession, and although there are international games, they do not escalate into a rupture. From the current U.S. economic data, this situation is consistent:

From the most critical perspective of residents: In the fourth quarter of last year, the wealth appreciation effect of equity and real estate assets weakened, and this trend will continue in the first quarter under ongoing revaluation. Due to policy uncertainty caused by the change of leadership, residents' tendency to save has increased, which is also not conducive to consumption. It remains to be seen whether residents will continue to raise their savings rate, thereby squeezing consumption.

The latest CPI data, which occurred basically before the tariffs, shows that prices are declining from high levels, with core prices increasing only 0.23% month-on-month. Energy prices have stabilized, and core categories, such as new and used cars in core goods, and transportation in core services, have seen significant slowdowns in price increases, especially transportation services, which changed from a positive growth of 1.8% last month to a negative growth of 0.8%. Overall, core goods increased by 0.2% month-on-month, while core services increased by 0.3%, indicating a clear cooling of prices.

Under Trump's suppression, long-term bond yields are currently at 4.3%. This yield does not meet the ideal interest cost for the Republican Party when issuing long-term bonds (the comprehensive interest rate of the existing national debt is around 3.5%). Meanwhile, the U.S. Treasury's TGA account is rapidly depleting weekly, indicating an imminent need for funding.

It can be understood that Trump will continue to manage expectations and implement policy measures to suppress the expected yield of long-term bonds. As U.S. Treasury yields decline, the yields on Chinese bonds will recover, and the narrowing spread between the two will provide continuous favorable space for the revaluation of Chinese assets.

IV. Portfolio Adjustment and Returns

Last week, Alpha Dolphin made no adjustments. The Alpha Dolphin portfolio had a return of -0.5% last week, underperforming the CSI 300 (+1.6%) and MSCI China (-0.1%), but outperforming the S&P 500 (-2.3%) and Hang Seng Tech (-2.6%).

Since the portfolio began testing (March 25, 2022) until last weekend, the absolute return of the portfolio is 81.5%, with an excess return of 75% compared to MSCI China. From the perspective of net asset value, Dolphin Research's initial virtual asset of 100 million USD has exceeded 184 million USD as of last weekend.

V. Individual Stock Profit and Loss Contribution

Trump's remarks about "recession" and the U.S. Treasury Secretary's "cleansing" statements have suppressed expectations for U.S. stocks, leading to a decline in Chinese assets as well. However, the overall decline in Chinese assets has been relatively restrained, while high-valuation and fundamentally weak U.S. assets have seen larger declines.

The specific stocks with significant price fluctuations are explained by Dolphin Research as follows:

VI. Asset Portfolio Distribution

The Alpha Dolphin virtual portfolio consists of 17 stocks and equity ETFs, with a standard allocation of 8 stocks, an overweight of 1 stock, and the rest underweight. Besides ancient coins, assets are mainly distributed in gold, U.S. Treasury bonds, and U.S. dollar cases. As of last weekend, the asset allocation and equity asset holding weights of Alpha Dolphin are as follows:

7. Key Events This Week:

This week, a concentrated wave of earnings reports from Chinese concept stocks, including Tencent, Xiaomi, Pinduoduo, and Meituan. There are many heavyweight companies, and Dolphin Research has already provided a classification and outlook at the beginning.

Specific key focus areas for individual stocks are summarized by Dolphin Research as follows: