Techno

China’s Internet giants turn to chips to lure back investors

0

China’s biggest Internet companies, their shares beaten down by government regulation this year, have a new catalyst to lure buyers: semiconductors.

Tencent Holdings, Alibaba Group and Baidu are among the consumer-orientated technology companies that have pursued chip development, in line with Chinese authorities’ ambition for the nation to be self-reliant when it comes to semiconductors.

Just on Wednesday, Tencent shares erased losses and finished 1.1% higher after the company unveiled an artificial intelligence chip for search and recommendation, another for compressing video files and a networking chip for cloud servers. Alibaba’s stock jumped in October when the e-commerce behemoth unveiled one of the nation’s most advanced semiconductors, for use in data centres.

The efforts show the companies are trying to appease the Chinese government

The efforts show the companies are trying to appease the Chinese government, which wants to establish dominance in chip design and production by 2030 through state-led efforts. That should reassure investors who have been rattled by Beijing’s crackdown, in which it’s pressing companies to curb monopoly practices and thus affected their growth in consumer e-commerce.

“It’s definitely good news for their shares,” said Steven Leung, executive director at UOB Kay Hian. “It’s an area that the government supports the most. It’s something that investors will want to hear at this moment, as they are looking for reasons to buy after such a big correction.”

The Hang Seng Tech Index has plunged 42% from its February peak, with Alibaba, Baidu and Tencent each down 36% or more.

Kunlun

Baidu is a pioneer among technology giants in tapping into the semiconductor industry. Its AI chip, called Kunlun, powers the company’s in-house applications including its search engine, and the company is considering a spinoff of the AI chip unit.

China is fighting against a global shortage of chips caused by the pandemic, as well as a US ban on the use of American technology by Chinese companies.

The push into chip development is a “strategic move” for these Chinese tech companies to be aligned with Beijing’s policies, Nuno Fernandes, a US-based portfolio manager at GW&K Investment Management, said in an interview.

“It shows that they are compliant with most of the requests from the government and willing to channel a big portion of their profits into a strategic investment like this to support the nation’s goal,” he said, adding that the chip industry is less likely to attract regulatory scrutiny.

The chip development plans require long-term investments and should contribute little to their near-term earnings, said Castor Pang, head of research at Core Pacific-Yamaichi International Hong Kong. But still, the moves have eased some investors’ concern about the tensions between Chinese technology companies and the government, Pang said.

“At least they have proved that they are loyal to this country and to the government. They are somehow helping Beijing to solve the problem of the chip shortage. And perhaps in return, the government may hold less high-profile regulatory meetings with them,” said Pang.  — (c) 2021 Bloomberg LP

Now read: Tencent gets into the chip business

Source

Ecobank Fintech Challenge: Ecobank Group Announces the Top 5 Finalists

Previous article

England and New Zealand chase double champion tag

Next article

You may also like

Comments

Comments are closed.

More in Techno