ChatGPT mania is pumping Chinese AI tech stocks higher

SHANGHAI (Reuters) – Chinese AI stocks are the latest fury in mainland markets as the global frenzy surrounding the Microsoft-backed ChatGPT chatbot spurs speculative bets on the revolutionary computing technology.

Just two months after its launch, ChatGPT — which can generate articles, essays, jokes, and even poetry in response to prompts — was rated as the fastest-growing consumer app in history. That has prompted Google owner Alphabet Inc to plan its own chatbot service and use more artificial intelligence for its search engine.

While ChatGPT is not accessible in China, mainland investors are still pumping the stocks of AI technology companies like Hanwang Technology Co, TRS Information Technology Co, and Cloudwalk Technology Co.

The CSI AI Industry Index, which includes larger-cap companies like iFlytek Co, is up about 17% this year, outpacing the 6% rise in the benchmark CSI300 index.

Certainly there is no indication that these AI companies are on the verge of launching a ChatGPT-like product. Search engine giant Baidu Inc, which plans to complete testing of its “Ernie bot” in March, appears to be the closest. Its shares rose more than 13% on Tuesday after the announcement.

“The industry as a whole tends to speculate on expectations first before acting on actual results later,” said Zhang Kexing, general manager of Beijing Gelei Asset Management.

Shares of Hanwang Technology, which makes products that enable intelligent interactions, jumped above its 10% daily limit for the seven sessions after markets reopened after the Lunar New Year holiday, and has soared more than 60% so far in February .

The company expects an annual loss in 2022, but believes it has an advantage over an interface like ChatGPT as its model can provide more precise results for customers.

Cloudwalk shares have more than doubled in the seven trading days since the Lunar New Year holiday. On Tuesday, the company warned investors, saying its losses deepened in 2022, it had not partnered with OpenAI, and it had no revenue from ChatGPT-related services and products.

Other companies that have announced their advances in AI technology include TRS Information Technology and Beijing Haitian Ruisheng Science Technology Ltd. Their share prices have also skyrocketed.

The price hike has boosted valuations. TRS, for example, is trading at almost 60 times earnings, while Huisheng’s price-to-earnings ratio is more than 240.

Private investor Lu Deyong has bought shares in TRS and iFlytek and wants to benefit from the ChatGPT hype.

“ChatGPT is just a hot idea,” he said. However, he does not believe that “China can realize such a technology in the short term”.

“For us retail investors, we prefer smaller stocks with this concept to make a quick buck,” Lu said.

(Reporting by Samuel Shen, Jason Xue, and Brenda Goh; Editing by Vidya Ranganathan and Christian Schmollinger)

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