China AI Earnings: BABA's Qwen Threatens GOOGL & META, Previewing BIDU & JD

these reports this week. Let's go deeper into our tech spotlight. Dave Nicholson, Chief research officer of Futurum, is with us. So we look at the Quinn download surpassing 3 billion. In fact, it even surpasses some of the names that we know all too well here at home. This is a really big deal, isn't it? Yeah it is. Nicole. Nicole. It is a big deal. And if you go back just a couple of weeks ago, an open letter was published by Jensen Wong supporting the idea of open weight models and urging regulators to go easy on regulating them out of existence. And a whole bunch of people signed on to this. And Quinn and a variety of models are at the center of this. So it's not just in the Chinese domestic market where Apple is now allowing Quinn to come into the Siri universe. Tesla is in talks to experiment with with Quinn solutions. So I would say that this is the biggest deal from an Alibaba perspective. What does it mean for something like Meta and Google when you have this kind of demand for Quinn? It means huge pricing pressure. We recently did a study that showed that the gap between the cheapest way to do generative AI and the most expensive way was about a 600 X gap between the most expensive frontier models and the cheapest open weight models, some of them versions of Quinn. Now, that doesn't mean that every model can do everything, but increasingly, in this era of tokenomics, as people scrutinize the cost associated with generative AI, people are going to lean in the direction of low cost. And this is where Alibaba and Quinn can be a leader. And they're already taking market share. You talked about some of the other names. Let's hit some of these like JD and Baidu. Yeah. So Baidu I think you showed that Baidu was was showing down. They're constantly punished for for beating estimates because they're held to a different standard. They're continuing to invest heavily in AI which is a good thing. We expect that they're going to post solid numbers, but they're more of a tradition. They're being measured more as a traditional business play. It's all going to be about margins versus investment in AI. So I think Alibaba is getting a pass in that regard because people are making a longer term bet than than than Baidu. Now, one thing with Baidu that's interesting. Their Apollo Go robotaxi initiative is going to be rolled out in London in the very near future. And I think that because of the narrative associated with kind of a negative assessment of autonomous driving, it's not getting the press that it should. So I think investors should take a really close look at what they're doing from an autonomy perspective. You also noted with Baidu, you talked about the ad decline versus the AI CapEx. And can you elaborate on that? Yeah, yeah. So if you go back at, you know, at the macro level, from an AI investment perspective, the narrative globally has been, well, it's okay because all of this investment has been fueled by revenue, ad revenue in a lot of cases in other companies in addition to Baidu. And and in this case, we're seeing the same thing. So as ad revenues go down, AI investment goes up, the skittishness of investors is bound to go up also because it's seen as more of a risk. And you said Baidu gets punished. You know, it's a little different. It's more of a business looking at margins. And Baba now it maybe gets a pass to a certain extent. At the same time you were looking at some of these names, Alibaba which had four misses in a row. The stock kept climbing. Right. Your thoughts on you know would we see a miss. Is that something you're sort of setting us up for. Well, eventually a miss will reset the table. I don't know that a miss will significantly reset the table on the heels of what's going on with Quinn. That is the story. The story is the ability to penetrate global markets with models. And so I think that if you accept that investment is still seen as the right thing to do in AI infrastructure, I think that Alibaba will continue to get a pass in the near future. And well, and we think about demand and interest in Chinese related stocks. I did mention JD, which was one of the names that you brought to us. And you talked about that overall. They saw retail operating margin hit 4.6%, a record for a peak promotional quarter. So there were certainly some bright spots. What do you tell folks about how they look at this group? I mean, I know you're not a investor like to tell us whether or not to buy the stocks, but the group overall, are they all part of the AI race? And are they all names that you respect the growth that you're seeing? Yeah, I think that the one Didi Pinduoduo, which is parent of Temu, is in a separate category. But I would say of the three Baidu, Alibaba and JD, I would say that JD is the most sort of traditionally focused business. They're in logistics. They just reported. So we know what's going on with them right now. Alibaba is the long term AI play. And I think they're well positioned to take market share against some of the leaders in North America. Baidu is more of the wild card in this mix because they're being held to a different standard than Alibaba is. But I think that they're that they're a solid investment moving forward. Again, on the backs of things like autonomy. Don't underestimate the mid the mid term value of what autonomy and robotaxis and the like can do for those companies. Okay. Dave Nicholson