Cambricon Technologies Corp aims to triple output to replace Nvidia in China

Alibaba's share price appears to be recovering from its previous low valuation. The company's growth is currently being driven by the expansion of the Chinese e-commerce market. However, we are more sceptical about the company's long-term prospects. Momentum has now turned positive on US stock markets, having been wait-and-see as recently as Monday 1 December. This is due to expectations that the Federal Reserve will cut its key interest rate next week.

Over the last several quarters, the bullish outlook for Alibaba Group has emphasised the importance of the Alibaba International Digital Commerce Group (AIDC) as a driver of the Company’s long-term prospects. That narrative has shifted. AIDC, which had previously been growing faster than the rest of Alibaba, recorded year-on-year growth of just 10% in the most recent quarter. By comparison, the company's total revenue increased by 15%, while its China eCommerce division saw a 16% rise. Meanwhile, Alibaba’s stock has slowly recovered after years of poor performance, though it remains over 35% below its 2020 peak. As the shares recover, the company’s valuation is moving more in line with that of major US tech companies, with the stock currently trading at around 23 times forward earnings.

Wednesday's macro agenda is dominated by the release of the services purchasing managers' indices for November from most of the major economies, including the United States, China, Germany and Japan. However, the most important event occurs next week on 10 December, when the Federal Reserve will announce their next interest rate decision.

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Foreign investors may shift more funds toward India as the popular Artificial Intelligence (AI) trade in the US, Taiwan and Korea appears stretched, according to Harald van der Linde, Head of Asia Equity Strategy at HSBC.

“I think the AI story can continue,” van der Linde said, but he noted that positioning in key semiconductor markets has become heavy. Stocks such as SK Hynix and Taiwan Semiconductor Manufacturing Company (TSMC) are already large positions in major Asian and emerging market portfolios. Investors may now ask “how much more can you really buy?” he said, which could open the door for more capital to move to other Asian markets.

India could be a key beneficiary. “My suspicion is that as we go into 2026, that foreign investors increasingly going to put India back onto their radar screens,” van der Linde said. He pointed out that Indian equity valuations have become more attractive after the market cooled over the past 18 months, particularly when measured in US dollar terms due to the weaker rupee. As a result, “India is clearly starting to offer good value,” he added.

Currency dynamics could support the shift. The US Federal Reserve has not yet cut interest rates, while India has entered a rate-cutting cycle. If the US starts to ease policy, possibly later this year or in 2026, it could limit further rupee weakness. Van der Linde said foreign investors may then feel “it’s not so bad to go back into India and have that rupee exposure,” along with better entry prices for Indian stocks.

Global monetary policy remains an important factor for market flows. A new US Fed Chair is expected to continue rate cuts, although van der Linde cautioned against aggressive moves that could repeat inflation problems seen in the 1970s.

Japan’s interest rate path may also influence Asia’s investment outlook. Japan is one of the few major economies raising rates due to a tight labour market. A stronger yen may not support Japanese equities but could push Japanese and Korean savers to redirect money elsewhere in the region. Van der Linde said this combination of US easing and Japan tightening could help India attract more foreign capital as 2026 approaches.

India's e-commerce sector is standing at an inflection point, poised to double its market penetration from 7% to 14% over the next seven to eight years, mirroring the growth trajectories previously seen in China and the US. This expansion will be significantly amplified by the rapid adoption of quick commerce (Q-comm) and growth in under-penetrated categories. Speaking on CNBC TV18, Karan Taurani, EVP at Elara Capital, who authored a detailed report on the subject, shared his insights on the timeline to profitability, valuation metrics, and the strategic outlook for investors in this burgeoning space.

According to Taurani, while demographic factors, logistics, and payment mechanisms provide a foundational tailwind, the primary drivers for this accelerated growth will be quick commerce and deeper penetration into categories like fashion, general merchandise, and food, where India's adoption rates are still low compared to global markets. He explained that this dual-engine growth is what sets India's market apart from its global counterparts.

Drawing parallels with global internet giants like Amazon and Alibaba, which took approximately 15 years to achieve profitability, Taurani noted that most Indian business-to-consumer (B2C) platform companies are in the middle of this cycle, around the 18 to 20-year mark of their operations. While mature segments like food-tech have seen growth rates converge to 20-25% and are now operating with healthy earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins, quick commerce is a newer business model set to scale rapidly.

Crucially, Taurani argued that Q-comm in India may not require the extended 15-year timeline to turn profitable. "QC may not see that much amount of time because e-commerce is already a category which is being created. You don't have to actually get new customers for QC; it is just use the existing e-com customers and give them this as a value-add service," he stated. Evidence from metro markets, where mature dark stores are already reporting contribution margins of 3-4% on gross order value (GOV), supports this thesis of a shorter path to profitability.

For investors, the landscape presents a dilemma as there are no pure-play Q-comm companies listed. These high-growth businesses are typically bundled within larger listed entities. To navigate this, Taurani proposed a two-phased valuation approach. For the first 15-18 years of a company's life, the focus should be on growth, using metrics like Enterprise Value to Sales (EV/Sales). After this period, as the business matures and consolidates, the focus should shift to profitability and discounted cash flow (DCF) models.

Elaborating on this model, Taurani benchmarked Indian platforms against Amazon's journey. At a similar stage of maturity, with growth rates of 20-23%, Amazon traded at an EV/Sales multiple of about 2.5 times. Given the projected growth of about 45% on a consolidated basis over the next 3–4 years, a premium multiple of 4.5 to 5 times EV/Sales could be justified. In the long term, a DCF analysis suggests that quick commerce will have a higher penetration number because of a larger use case, a larger AOV (average order value), and a larger time compared to food tech, with profitability expected within five to seven years.

However, Taurani cautioned that Indian internet companies currently trade at a significant premium, around 70% higher on an EV/Sales basis compared to global peers. This premium is sustained by high growth expectations. "Growth is a big variable here," he warned, noting that if growth rates were to decelerate from 45% to 30%, it could trigger a valuation de-rating. Therefore, to support their premium valuations, companies must not only demonstrate a clear path to profitability but also continue to drive high growth by expanding into new markets and businesses. With Q-comm expected to take five to seven years to mature, investors should be prepared for continued volatility.

By Jack Denton

Alibaba stock was falling on Friday following a recent report that the company could be among those included on a Pentagon watchlist — a reminder of regulatory horrors that haunted the shares for years.

Alibaba's American depositary receipts, or ADRs — essentially the company's U.S.-listed shares — were down 1% in early U.S. trading on Friday.

The decline followed news late Wednesday that the Pentagon told Congress that Alibaba should be added to a list of companies that aid the Chinese military, Bloomberg reported, citing a letter to Congress which it said it viewed.

It is not yet clear if Alibaba and other companies, including Baidu and BYD, have yet been added to the "1260H" Pentagon list of Chinese military-linked companies, the report added.

The story was re-reported in other outlets widely on Thursday, when U.S. markets were closed for the Thanksgiving holiday.

Congress was notified of the Pentagon's conclusions on Oct. 7, a few weeks before breakthrough trade talks between President Donald Trump and his Chinese counterpart Xi Jinping, according to the Bloomberg report.

A 1260H designation would not constitute a ban of sorts for Alibaba and others, but would mark a hit to the company's reputation and could raise general regulatory risks for U.S. investors and prospective clients.

"There's no basis to conclude that Alibaba should be placed on the Section 1260H List," Alibaba said in a statement.

"Alibaba is not a Chinese military company nor part of any military-civil fusion strategy," the company added. "We further note that, because Alibaba does not do business related to U.S. military procurement, being on the Section 1260H List would not affect our ability to conduct business as usual in the United States or anywhere in the world."

A Baidu spokesperson said in a statement that "there is no credible basis for adding Baidu to the 1260H list or any other U.S. government list of restricted companies."

"The suggestion that Baidu has military connections is entirely baseless and no evidence has been produced that would prove otherwise. Our products and services are designed for civilian use. Were the company to be formally listed, we would not hesitate to use all options available to us to have the company removed from the list as many have successfully done in the past," the spokesperson added. "As we are not a supplier to the U.S. military, this potential listing would have no material impact on our business."

Barron's has reached out to BYD for comment. Baidu stock was up 0.6% on Friday. Shares in BYD are not traded in the U.S. on main exchanges but rather over-the-counter markets.

For Alibaba investors, Pentagon watchlist talk is, more than anything else, a reminder of the potentially devastating power of regulatory risks for the stock.

Shares in the company have been on a roll, up 85% this year to the highest levels since 2021 — helped by a meaningful pivot to artificial intelligence — but the stock continues to trade at around half its late-2020 peak.

In late 2020, Alibaba became the face of a regulatory crackdown on the tech sector by Beijing, which was compounded by regulatory pressures in the U.S. The stock fell and then stagnated, seemingly relentlessly, for years, before a rebound began in earnest in late 2024.

Investors will be hoping days of regulatory pain are over — and momentum in the stock would suggest they are. But even reminders of the risks that remain for Chinese tech names may be enough to shake confidence.

Write to Jack Denton at jack.denton@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By Tracy Qu

Chinese food-delivery giant Meituan swung into the red for the first time in nearly three years, buckling under the costs of a brutal price war.

The Beijing-based company on Friday reported a third-quarter net loss of 18.63 billion yuan, equivalent to $2.63 billion, compared with profit of 12.86 billion yuan a year earlier. Revenue rose 2.0% to 95.49 billion yuan.

Both figures fell short of expectations. Analysts had predicted a net loss of about 15.68 billion yuan on revenue of 97.69 billion yuan, according to FactSet consensus estimates.

"Market competition has remained overheated," Meituan said in its earnings report. Overseas expansion also dragged on profit, it said. That led the company to expect continued operating losses in the fourth quarter for its core local commerce segment and business overall.

Meituan, a longtime leader in China's food-delivery industry, has been under increasing pressure from rivals like Alibaba Group and e-commerce platform JD.com.

The Chinese shopping-and-delivery platform has been aggressively offering discounts to attract customers, a move seen as necessary to defend its market share. Soft Chinese demand has only fueled the competition with JD.com and Alibaba's Ele.me. In the latest quarter, JD.com's profit slumped 55%, partly due to its costly push into food delivery. Alibaba this week reported a halving in profit due to heavy spending on food delivery and artificial intelligence.

Meituan said Friday that "continuous intensified competition in food delivery" caused its core local commerce segment to swing to an operating loss of 14.1 billion yuan in the third quarter, with revenue falling 2.8% from the previous year.

As for the new initiatives business, the company said operating loss widened to 1.3 billion yuan due to its overseas push, although revenue increased 16%.

The price war has drawn the ire of Beijing, with China's top market regulator earlier this year calling for the companies to engage in "rational" competition.

Analysts at Jefferies said Chinese e-commerce companies' quick-commerce losses likely peaked in the September quarter, suggesting that the hit to earnings could start to moderate. The key period to watch is the June quarter next year, as unit economics tend to be better following the Lunar New Year in the first quarter, they wrote in a report this week.

Sentiment remains subdued for now as Meituan and other platforms continue to grapple with a relatively weak Chinese economy, which has led to muted consumer spending. Shares in the Hong Kong-listed company have lost about one-third of their value this year, compared with the benchmark Hang Seng Index's nearly 30% gain over the same period.

Write to Tracy Qu at tracy.qu@wsj.com

By Tracy Qu

Meituan reported a quarterly net loss for the first time in nearly three years as a brutal price war took a toll on the Chinese food-delivery giant.

Net loss for the third quarter was 18.63 billion yuan, equivalent to $2.63 billion, swinging from profit of 12.86 billion yuan a year earlier, the Beijing-based company said Friday. Analysts had expected a 15.68 billion yuan loss, according to a FactSet consensus estimate.

Revenue climbed 2% to 95.49 billion yuan, weaker than analysts' estimate of 97.69 billion yuan.

Meituan, a longtime leader in China's food-delivery industry, has been under increasing pressure from rivals like Alibaba Group and e-commerce platform JD.com.

The Chinese shopping-and-delivery platform has been aggressively offering discounts to attract customers, a move seen as necessary to defend its market share against Alibaba's Ele.me and JD.com. In the latest quarter, JD.com's profit slumped 55%, partly due to its costly push into food delivery. Alibaba this week reported a halving in profit due to heavy spending on food delivery and artificial intelligence.

Write to Tracy Qu at tracy.qu@wsj.com