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A seismic shift is underway in the artificial intelligence (AI) race, and this time, it’s not coming from Silicon Valley. DeepSeek, a one-year-old Chinese startup, sent shockwaves through the U.S. tech industry with its latest AI model, R1. Unlike the AI models of OpenAI, Google (GOOGL), and Meta (META), which rely on cutting-edge, high-cost chips and energy-intensive infrastructure, DeepSeek’s R1 achieves comparable performance while operating on significantly less advanced chips and far less power.
This stunning development has shaken the foundations of U.S. tech dominance, challenging the notion that AI supremacy requires the most expensive and sophisticated chips. While this revelation has clearly unsettled many well-known names in Silicon Valley, China’s market, on the other hand, appears to be thriving, with its tech stocks surging as the nation’s AI ambitions gain momentum. The Hang Seng Tech Index ($HSI), which tracks Chinese tech giants, has climbed sharply from its January low, posting double-digit gains as confidence grows in the country’s AI-driven future.
That being said, as DeepSeek shakes up the AI race, investor faith in U.S. tech giants appears to be faltering, with growing concerns over the sustainability of massive spending on AI infrastructure. At the same time, China’s tech sector is thriving on the buzz, gaining momentum as the competitive landscape shifts. Thus, with this disruption creating new opportunities, now could be the perfect time to consider these three tech stocks poised for potential gains.
Tech Stock #1: Tencent
Founded in 1998, Tencent Holdings (TCEHY) has become a global powerhouse, offering a wide array of internet-related services and products as well as AI technologies. Known for publishing some of the world’s most popular video games and high-quality digital content, Tencent enriches interactive entertainment experiences for millions worldwide. Beyond entertainment, the China-based company also supports businesses with a range of services, including cloud computing, advertising, fintech, and enterprise solutions, driving digital transformation and fueling growth for clients across the globe.
Presently commanding a market cap of around $521 billion, shares of this technology and internet service provider have posted impressive returns of 52.5% over the past year, smoothly sailing past the broader U.S. equity benchmark, S&P 500 Index’s ($SPX) 20.7% return during the same stretch.
The company’s Q3 earnings report, published on Nov. 13, revealed a solid 8% year-over-year jump in total revenue to $23.9 billion, driven by the power of its gaming business.
Gaming continues to be the company’s cornerstone, with domestic revenue climbing 14% year-over-year and international game sales soaring 11% annually on a constant currency basis. Popular names like VALORANT, Honour of Kings, PUBG MOBILE, and Brawl Stars played a key role in this stellar performance, solidifying the company’s leadership in the global gaming industry.
On the earnings front, Tencent delivered an impressive 50.4% year-over-year growth in earnings per share, reaching 5.644 yuan. As of Sept. 30, the company reported an impressive cash position of $60.7 billion, accompanied by a solid free cash flow of $8.3 billion. With a strong net cash position of $13.6 billion, the company continues to showcase its financial strength and operational efficiency, paving the way for sustained growth and strategic investments.
Tencent also emphasized the growing impact of its self-developed AI tools as the company continues to harness AI’s potential in line with the global surge in demand.
Wall Street seems largely bullish on TCEHY, with a consensus “Strong Buy” rating overall. Of the 15 analysts offering recommendations, 13 are firmly backing it with a “Strong Buy,” one advises a “Moderate Buy,” and only one gives it a “Hold.”
The average analyst price target of $58.29 indicates only 3.2% potential upside from the current price levels, while the Street-high price target of $66 suggests that TCEHY could rally as much as 16.8% from here.
Tech Stock #2: Alibaba Group
Alibaba Group (BABA) is a global tech giant dominating the world of e-commerce, retail, internet services, and cloud computing. Through its online marketplaces like Taobao and Tmall, this Chinese company facilitates everything from consumer-to-consumer (C2C) to business-to-business (B2B) transactions, solidifying its status as one of the largest online commerce companies worldwide. But Alibaba’s influence extends far beyond shopping.
The company also provides a broad spectrum of services, including local consumer solutions, digital media, entertainment, and logistics, positioning itself as a multifaceted leader in both global commerce and technology. Valued at around $264.5 billion, shares of this e-commerce player have outshined the broader market, with substantial gains of roughly 54.6% over the past year.
Alibaba Group dropped its fiscal 2025 Q2 earnings report on Nov. 15, which painted a somewhat mixed picture. While revenue grew 5% year-over-year to $33.7 billion, non-GAAP earnings per ADS declined by 4% annually, settling at $2.15.
Despite a modest 1% year-over-year revenue increase to $14.1 billion, the company’s domestic e-commerce segment showed impressive momentum, with Taobao and Tmall setting new records for monthly active consumers, highlighting sustained shopper engagement and platform strength.
This success was driven by strategic initiatives, including price-competitive products, improved customer service, enticing membership program benefits, and innovative technology, all contributing to the segment's continued strength. On the other hand, revenue from the Cloud Intelligence Group reached a robust $4.2 billion during the quarter, marking a 7% year-over-year increase.
Excluding Alibaba-consolidated subsidiaries, overall revenue from this segment grew more than 7% year-over-year, driven by impressive double-digit growth in public cloud services. Notably, AI-related product revenue continued its remarkable trajectory, soaring at triple-digit rates for the fifth consecutive quarter, highlighting the growing demand for the company’s AI-driven solutions. Alibaba is gearing up to reveal its Q3 earnings report before the opening bell on Thursday, Feb. 20
Overall, Wall Street is highly optimistic about BABA stock, with a consensus “Strong Buy” rating overall. Of the 19 analysts offering recommendations, 17 are giving it a solid “Strong Buy, while the remaining two suggest a “Hold.”
The average analyst price target of $120.16 indicates 8% potential upside from the current price levels, while the Street-high price target of $145 suggests that BABA could rally as much as 30.3% from here.
Tech Stock #3: Lenovo Group
Hong Kong-based Lenovo Group (LNVGY) has emerged as one of the world’s largest PC makers. The company has expanded its reach with a diverse range of AI-powered devices, including PCs, smartphones, and tablets, as well as advanced infrastructure solutions like servers and storage.
With a market cap of approximately $19.4 billion, shares of this PC maker, much like TCEHY and BABA, have outpaced the broader U.S. market, posting gains of around 49.4% over the past year.
The PC maker delivered a standout fiscal 2025 Q2 earnings report on Nov. 15, marking its fourth consecutive quarter of year-over-year revenue growth. All business segments contributed to the momentum, posting strong double-digit gains. Total revenue surged a notable 24% year-over-year to $17.9 billion, while earnings per share showed an impressive 40% annual jump to $2.78. Diving deeper into segment performance, the Intelligent Devices Group (IDG) delivered a stellar quarter, with revenue surging 17% year-over-year to $13.5 billion.
The company noted in its earnings release that its hybrid AI strategy and sustained investment in research and development are proving to be a game-changer. Its first wave of AI-powered PCs, launched in China in May 2024, is already making an impact, capturing a double-digit share of total notebook shipments in the country, a testament to the growing demand for intelligent computing solutions.
In fact, Lenovo’s PC business solidified its dominance, expanding market leadership to nearly 24% and widening its lead over the second-largest player by four points. Meanwhile, the Infrastructure Solutions Group (ISG) achieved a record-breaking quarter, with revenue soaring a stunning 65% year-over-year to $3.3 billion, driven by strong cloud momentum and a rebound in enterprise demand.
Looking ahead, management emphasized that the company is doubling down on innovation in hybrid AI to fuel its next phase of growth and profitability. With a strong foundation and a clear vision, Lenovo remains confident that its current momentum will carry through the rest of the fiscal year.
Despite limited coverage, analysts appear to be bullish on LNVGY stock, with a consensus “Strong Buy” rating overall. Of the four analysts offering recommendations, three advise a “Strong Buy, and the remaining one gives a “Hold.” Plus, the average analyst price target of $25.60 indicates a 22.1% potential upside from the current price levels.
