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AI Boosts China Software: Fears Overstated
8 May
Summary
- AI is seen as an opportunity, not a threat, to software firms.
- Chinese software stocks trade below historical averages due to AI fears.
- New AI tools are enabling faster product development and feature additions.
Chinese software firms are expected to benefit significantly from the rapid adoption of artificial intelligence, according to HSBC analysts. Concerns that AI, particularly large language models, could undermine demand for traditional software have led to depressed valuations. However, HSBC suggests these fears are largely priced in and that AI presents more opportunities than threats.
Firms are leveraging AI for faster product development and enhanced features. Lower AI model costs and improved coding efficiency are key drivers. The adoption of AI is also fostering alternative pricing strategies, such as workflow- or outcome-based charging, which could further boost earnings.
HSBC specifically favors companies like Intsig and ArcSoft for their AI monetization capabilities and international expansion. Enterprise software makers Kingdee and Yonyou are also identified as beneficiaries of rising demand for AI-native enterprise resource planning tools. AI-related orders are a growing revenue stream for these companies.
