Why Chinese Tech Stocks Alibaba, Tencent, and GDS Holdings Are a Bright Spot in the Stock Market Today

Chinese tech stocks continued to be a bright spot in the stock market as the tech-heavy Nasdaq Composite fell slightly. Chinese officials have signaled they are open to supporting the sector as it becomes increasingly important for the struggling Chinese economy.

Shares of Alibaba (NYSE: BABA) had risen 1.7% in the final half-hour of trading. Meanwhile, shares of Tencent (OTC: TCEHY) and GDS Holdings Limited (NASDAQ: GDS) traded 4.6% and 4.1% higher, respectively.

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An olive branch from President Xi Jinping

Chinese stocks reacted favorably after China's President Xi Jinping held meetings with Chinese tech and start-up leaders in a move indicating a more friendly approach to the sector. The meeting included Alibaba co-founder Jack Ma and DeepSeek founder Liang Wenfeng.

According to an official document released after the meeting and reported on by Bloomberg, Jinping told tech leaders he would not impose unwarranted fines and encouraged start-up leaders to remain competitive.

"The decision to call for such a meeting likely indicates the importance of technology innovation and the contribution of private enterprises to the development and growth of China's economy," Citigroup analysts wrote in a research note, according to Bloomberg. "We view the emphasis on internet and tech providing valuation multiple support for China's internet sector."

Investors considered the attendance of Ma as a symbolic gesture that Chinese officials are ready to embrace the tech sector because Ma has largely stayed out of the limelight since speaking out against regulators in a speech in 2020. Despite an economy that continues to deal with deflationary headwinds and a struggling property market, Hong Kong's Hang Seng Index, which includes many Chinese tech stocks, has ripped 17% higher this year.

In other news, shares of the content and gaming company Tencent recently hit their highest level in about three years after the company began the process of incorporating DeepSeek's artificial intelligence (AI) chatbot into its messaging application Weixin.

The data center company GDS Holdings continues to ride the momentum of a big upgrade on Friday by analysts at Citigroup, who reiterated a buy rating while lifting their price target on the stock from roughly $25 to over $51. The analysts believe that the big cloud providers in China are poised to increase their AI spending and see AI capital expenditure increasing as well.

Earnings on deck

While Chinese stocks were beaten down heading into the year, the emergence of DeepSeek has fueled the sector, while the Magnificent Seven stocks have struggled so far in 2025. The meeting between Jinping and tech leaders adds more momentum because regulation has been a big obstacle for Chinese tech stocks in the past.

Investors should now turn their attention to Thursday, when Alibaba will report its third-quarter earnings for fiscal year 2025. Analysts at Morgan Stanley think the earnings report could offer many clues about AI trends in China. They also noted that GDS could be affected because Alibaba is a client.

GDS Holdings is not yet profitable, while Alibaba and Tencent are cheap on earnings. All these companies have tremendous potential because of the sizes of their markets, their technological innovation, and the AI trade. However, China's economy is in a very different place from the U.S.'s, and regulation can be difficult to predict, so they are likely going to be volatile. That's why investors need to be prepared to hold for the long term if they decide to invest.

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Citigroup is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tencent. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.