China’s tech giants set to lead AI growth in 2026 despite chip shortage: JPMorgan
News Summary
JPMorgan analysts forecast that China's internet giants will drive the continued adoption of artificial intelligence (AI) in the country in 2026, with AI chip shortages unlikely to pose significant short-term obstacles. Analyst Alex Yao noted that sustained user adoption of AI features will be a key theme in the coming year, despite the absence of clear evidence of AI monetization in China. While chatbot apps like Tencent's Yuanbao and ByteDance's Doubao are gaining traction, they remain relatively minor by mobile internet standards. Companies such as Tencent and Alibaba are expected to focus on integrating AI features into their established “killer apps” like WeChat and Taobao. These integrations are projected to generate significant “token consumption,” which will boost revenues for cloud service vendors and benefit downstream sectors including servers and random-access memory.
Background
The global technology sector is currently undergoing a profound transformation driven by artificial intelligence. Despite stringent chip export controls imposed by the United States and its allies on China, aimed at restricting China's development in advanced AI technologies, Chinese tech giants are actively pursuing enhanced AI capabilities and application deployment. AI chips, as the core hardware for AI training and inference, directly impact the pace of AI industry development in various countries. The Chinese government has prioritized AI as a national strategic focus, investing heavily to support indigenous AI technology and supply chain development to counter external restrictions and achieve technological self-reliance. In 2025, the Trump administration continues to maintain a hardline stance on its tech policy towards China, particularly in the semiconductor sector, which presents ongoing challenges for Chinese companies in acquiring high-end AI chips but also stimulates the R&D and deployment of domestic alternatives.
In-Depth AI Insights
What profound implications will the integration of AI into Chinese tech giants' existing "killer apps" have for investors? - This integration may go beyond simple feature enhancements, fundamentally reshaping user experience and business models through deeply embedded AI. For example, AI-driven personalized recommendations, intelligent customer service, content generation, and interactive advertising will significantly boost user stickiness and platform value. - For investors, this means companies with strong control over core application ecosystems (e.g., Tencent's WeChat, Alibaba's Taobao) will be able to more quickly translate AI capabilities into tangible business returns, solidifying their market dominance. - Increased cloud service demand and token consumption will directly benefit cloud infrastructure providers and upstream semiconductor supply chains (servers, memory), though domestic supply chains may benefit more given geopolitical tensions. Does JPMorgan's optimistic forecast adequately account for geopolitical risks and the long-term uncertainty of AI monetization? - While the report suggests chip shortages won't pose significant short-term obstacles, this might underestimate the potential long-term constraints of technology blockades on the high-end development and innovation pace of China's AI industry. The Trump administration's tech suppression policies carry high uncertainty and potential for escalation. - The "absence of clear evidence" of AI monetization is a crucial warning. Current user adoption may be more feature-driven than payment-driven, potentially extending ROI cycles, and investors should be wary of the sustainability of continuous "cash burn" models. - JPMorgan's perspective may focus on short-term market dynamics and the advantages of leading companies, while underestimating systemic risks arising from the broader industry competitive landscape and geopolitical evolution. Will the "token consumption" model of China's AI industry accelerate the process of domestic substitution and technological self-reliance for the upstream supply chain? - The increase in "token consumption" signifies a sustained high demand for AI computing power. Under Western technological restrictions, this will inevitably drive the accelerated development and localization of China's indigenous AI chip design, manufacturing, and supporting hardware like servers and memory. - In the long run, this demand-driven localization process will help establish a more resilient Chinese AI industry chain, reducing reliance on external technologies. Investors should focus on Chinese companies with technological breakthroughs and growth potential in AI infrastructure and domestic substitution. - Concurrently, this could also exacerbate the "fragmentation" of international technical standards, forming two distinct AI technology ecosystems, bringing new challenges and opportunities for the supply chain and market strategies of global tech companies.