Shares of China’s internet giants have sharply fallen out of favor this year, as investors’ funds flow toward AI chip makers. However, Citi believes the selloff has gone beyond its logical limits, creating an attractive buying opportunity.
The bank has shortlisted both PDD Holdings Inc DRC (NASDAQ:PDD) and Meituan (HK:3690), as well as Baidu Inc (HK:9888), NetEase Inc (HK:9999), Trip.com Group Ltd (HK:9961), and Full Truck Alliance Co Ltd ADR (NYSE:YMM) among its preferred options, arguing that many of these companies are now trading near the bottom of its valuation range over the past years, despite their continued ability to generate strong cash flows.
The sector has fallen behind its global counterpart as investors shift toward the winners in the artificial intelligence devices sector, such as Nvidia Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Co (TW:2330), and South Korean memory chip makers—leading many Chinese internet companies to incur losses at double-digit rates during 2026.
Citi estimates that the broader Chinese internet sector fell by about 24% this year, while major listed companies in Hong Kong—such as Alibaba Group Holding Ltd (HK:9988), JD.com (HK:9618), and Tencent Holdings Ltd (HK:0700)—also faced tangible pressure.
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Citi believes the recent weakness has overshadowed the underlying strength of several companies. Its most prominent picks are PDD and Meituan, while Baidu, NetEase, Trip.com, and Full Truck Alliance stand out for their large cash reserves and their continued share repurchases—a step that should help support stock prices and enhance shareholder returns.
The bank said these companies will appear cheaply valued even if earnings come in below expectations next year, suggesting that most negative news has already been priced into their stock prices.
Other reasons behind Citi’s optimism include financial strength: PDD alone has roughly $63,000,000,000 in net cash, while Baidu and NetEase also have significant cash cushions. Several companies, including Alibaba, Trip.com, Baidu, NetEase, and JD.com, still have mandates worth billions of dollars to repurchase shares, which Citi expects to accelerate in the coming months. Among the most shareholder-friendly recent moves is Baidu’s approval of a new $5,000,000,000 share repurchase program, along with the launch of its first-ever dividend policy.
While AI-device deals may continue to dominate markets in the near term, Citi expects investors to eventually return to profitable internet platforms—especially those with solid core businesses, strong cash generation, and growing AI capabilities.
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