AI race heats up: Bernstein says these stocks could win soon

Sanford C. Bernstein analysts argue the competition between China and the U.S. in artificial intelligence is increasingly driven by access to compute power and the energy to run it, not only by model sophistication. The firm highlights that scale, cost and the ability to monetize AI through applications will determine long-term winners.

Bernstein’s note came after breakthroughs from Chinese labs such as DeepSeek prompted fresh scrutiny of who can commercialize AI features at scale. The researchers point to specific opportunities in cloud infrastructure and enterprise software—naming companies such as Kingdee (0268.HK) and Beijing Kingsoft Office (688111.SS)—while cautioning that firms focused only on repackaging compute power face margin pressure. The firm also flagged Trip.com (TCOM) and Tencent Music (TME) as potential beneficiaries over time, and expressed concern about Baidu’s competitive stance in search and AI cloud.

Market implications are already visible: investors are reallocating toward infrastructure plays and energy-linked providers as data-center demand forecasts rise. Geopolitical moves—like evolving U.S. export rules for AI chips and China’s push for localization—add volatility but also create targeted opportunities in semiconductor suppliers and domestic AI chip designers. NVIDIA’s (NVDA) role and export policy developments remain a focal point for portfolio managers assessing China exposure.

In the broader economic context, major asset managers and industry analysts warn that AI-driven compute growth will push electricity consumption higher, making energy policy and supply a strategic element in the technology race. That dynamic favors regions and companies that can secure low-cost, reliable power and invest in grid and on-site generation solutions, shaping which markets and firms can sustain rapid AI scale-up.

Analysts recommend that investors separate short-term headline risk from structural winners: durable revenue models in cloud and enterprise software, plus strategically positioned infrastructure and domestic chip plays, may outperform. Bernstein’s outlook suggests select Chinese software and platform names could deliver upside if they monetize applications at scale, while chip localization trends and energy economics will be key variables to monitor.