Morgan Stanley and JPMorgan have named the top picks and themes to watch in China’s internet right now. Both Wall Street banks signaled it would be an alpha-driven market for the sector. “We believe alpha-driven investment strategies will continue to offer favorable risk/return in 2024,” JPMorgan said in a Jan. 16 note. “We believe it will be difficult to develop a beta-driven investment strategy in 2024,” the report said, noting that each subsector has different drivers. While alpha-driven returns indicate how well a stock is performing compared to a benchmark index, beta indicates how volatile an asset class is by comparing it to the overall market. indicate. “2024 should continue to be an alpha-driven market as below-average macro improvements weigh on industry growth,” Morgan Stanley said in a Jan. 18 note.The focus is on resilient content leaders, unique “The growth opportunity lies in AI enablers.” JPMorgan said the most tradeable themes this year include China’s growing momentum in cross-border e-commerce in global markets, the monetization of generated AI, and the growing focus on shareholder returns. Both banks named the following stocks as sector priorities: All traded in the US. Pinduoduo JPMorgan highlighted improved monetization and continued market share growth for his Chinese online retailer Pinduoduo. It also warned that the value of Temu, the company’s global e-commerce arm, is increasing as it rapidly expands overseas. Morgan Stanley said it expects PDD’s total revenue to increase 111% year over year in the fourth quarter of 2023, citing PDD’s “high-quality growth and market share expansion.” Morgan Stanley’s price target is $181, with a potential upside of 27.4%. JPMorgan’s price target is $180, with a potential upside of 26.7%. Baidu Morgan Stanley described Baidu as the “best AI strategy” in China. The magazine points out that Baidu’s cloud platform is currently China’s largest public artificial intelligence cloud platform, and estimates that AI will generate 3 billion Chinese yuan (approximately $419 million) in additional advertising revenue this year. There is. JP Morgan said: “We believe Baidu is a good contrarian long case as Baidu’s valuation multiples and consensus estimates do not appear to incorporate the assumption that Baidu’s artificial intelligence will be a medium-term growth driver. I’m thinking about it,” he said. Morgan Stanley’s price target is $140, with a potential upside of 35%. And JPMorgan’s price target is $215, with a potential upside of 107%. NetEase JP Morgan said NetEase’s stock price is likely to “regain momentum” from late in the first quarter of this year, thanks to the new product launch cycle. Morgan Stanley pointed to steady operating margin expansion and record growth in subscription revenue from the second to third quarters of 2023. The bank expects gaming revenue growth to be 15% this year. Morgan Stanley’s price target is $150, with a potential upside of 67.7%. JPMorgan’s price target is $125, with a potential upside of 39.7%. —CNBC’s Michael Bloom contributed to this report.