Chinese internet stocks fall 10–30% amidst tariff-driven selloff

Despite the short-term headwinds, the firm maintains a “Market Weight” rating on the sector.

Chinese internet companies are navigating a volatile stretch, with share prices falling 10–30% month-to-date due to escalating tariff tensions between the US and China. However, UOB sees opportunities in the sector, particularly amongst mega-cap names with strong domestic exposure and robust cash positions.

“The share prices of internet companies have corrected by 10–30%... [yet] we uncovered potential opportunities in view of the mega-caps’ undemanding valuation and ample net cash as a solid moat to navigate against geopolitical uncertainties,” the brokerage said.

Although most Chinese internet firms have limited US exposure, Temu – the overseas e-commerce platform by Pinduoduo (PDD) – is an exception. The firm is expected to feel the brunt of rising costs and a looming regulatory shift in the US.

“We expect ASP increases for Temu’s fully entrusted SKUs... and forecast Temu’s US GMV to grow at a moderated 6% yoy to US$20b in 2025,” the report stated.

UOB offered a range of EPS impact scenarios for PDD depending on tariff severity and revenue exposure. In a bear-case scenario (65–105% tariff), EPS could fall 7–13% in 2025; in a bull-case (35% tariff, lower US exposure), EPS might rise 4%.

Despite the short-term headwinds, the firm maintains a “Market Weight” rating on the sector, favouring companies with solid fundamentals. Alibaba and JD.com stand out, trading at just 11x and 8x 2025 forward P/E respectively, with large cash positions relative to market cap (77% and 93%).

The report also highlighted growth areas in artificial intelligence, noting that Chinese tech giants are ramping up investments. “Alibaba lifted its AI-related capex guidance with annual spending of RMB100b or US$14b for the next three years,” whilst “Tencent... purchased NVIDIA H20 chips worth several billion renminbi.”

JD.com, Meituan, and Trip.com also show resilient growth potential. JD guided for “double-digit growth in revenue and non-GAAP net profit in 2025,” whilst Meituan is focusing on market leadership in Saudi Arabia and expects “core local commerce EBIT... to see 25–28% YoY growth in 1Q25.”

UOBKH believes the sector remains underappreciated: “Compared with the previous market trough... China internet PE is currently trading at 12x P/E, with a 10–15% profit growth outlook.”

Top BUY-rated stocks in the report include Tencent, Alibaba, TAL Education, and Trip.com, each with target prices suggesting 40–65% upside from current levels.