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Alibaba Cloud — the cloud computing entity of the China-based multinational technology conglomerate Alibaba (BABA - Free Report) — recently announced that it will be launching its product Tongyi Qianwen, an AI model similar to ChatGPT.
Per an article published on CNBC, Tongyi Qianwen is set to command Chinese and English language capabilities. The cloud computing entity of Alibaba stated that the product would be available to its customers on the cloud, helping them build customized large language models in an economical way. The AI model is set to be integrated across Alibaba’s various businesses to improve user experience.
Users can soon expect more gripping AI features such as image understanding and text-to-image in the Tongyi Qianwen model, as stated by Alibaba Cloud. Following the revelation of Chinese company Baidu’s (BIDU - Free Report) own ChatGPT version, Ernie Bot, last month, Alibaba is the latest Chinese tech giant looking to enter in the AI domain.
What Lies Ahead?
The tech conglomerate saw its share price rise right after the announcement, but the price was pulled back shortly. However, the future impact of the AI model on Alibaba’s business depends upon the Chinese cyberspace regulator, Cyberspace Administration of China (“CAC”). The cyberspace watchdog revealed draft measures early this week for administering AI generation services.
As per a Reuters article, CAC stated that increased investments in emerging technology and its consumer popularity should be in line with China’s core socialist views. However, the country does encourage innovation and application of the AI technology. CAC stated that a penalty would be imposed on the providers if the guidelines of the regulator are not adhered to, facing the risk of having their services suspended or even undergoing a criminal investigation.
Initiative by Alibaba
In late March, Alibaba had announced a reorganization to split its business into six, which escalated the share price by nearly 14%. Many analysts believe that this decision by the tech conglomerate may result in a likely boost in valuation and help in safeguarding against regulations. However, this may come at the cost of economies of scale. (Read: Alibaba Shares Surge on Restructuring News: ETFs in Focus)
ETFs in Focus
Alibaba currently has a Zacks Rank #3 (Hold) and belongs to a top-ranked Zacks industry (in the top 35%). Against this backdrop, we highlight a few Alibaba-heavy ETFs for investors who expect the company to gain meaningfully after the introduction of Tongyi Qianwen.
The ProShares Online Retail ETF seeks investment results, before fees and expenses, which tracks the performance of the ProShares Online Retail Index. The fund has a basket of 25 securities with 11.93% exposure in Alibaba.
ONLN has an asset base of $102.49 million and charges an annual fee of 58 bps. It has a traded daily average volume of about 48,000 shares.
First Trust Dow Jones International Internet ETF (FDNI - Free Report)
The First Trust Dow Jones International Internet ETF seeks investment results that generally correspond to that of the Dow Jones International Internet Index. The index measure the performance of the 40 largest and most actively traded non-U.S. international companies in the Internet industry that are engaged in Internet commerce and Internet services. The fund has 10.8% exposure in Alibaba, making it the top holding in FDNI.
It has a basket of 41 securities and an asset base of $31.71 million. Charging an annual fees of 65 bps, the fund trades in an average daily volume of about 6,200 shares.
Global X Emerging Markets Internet & E-commerce ETF
The Global X Emerging Markets Internet & E-commerce ETF provides investment results that generally correspond to the price and yield performance of the Nasdaq CTA Emerging Markets Internet & E-commerce Net Total Return Index. The fund has a basket of 42 securities with an exposure of 8.86% in Alibaba, making it the top holding in EWEB. The fund has the highest allocation in China, with 64.6%.
The fund has gathered an asset base of $2.62 million and charges an annual fees of 65 bps. It has a traded daily average volume of about 1,100 shares and a Zacks ETF Rank #4 (Sell).
The Invesco Golden Dragon China ETF is based on the NASDAQ Golden Dragon China Index, comprising 38 U.S. exchange-listed stocks of companies that derive a majority of their revenues from the Peoples Republic of China. The fund holds 64 securities in its basket and has an 8.95 allocation in Alibaba. The tech giant is the top holding of the fund.
PGJ has amassed $217.31 million in its asset base and charges an annual fee of 70 bps. PGJ trades about 71,000 shares a day, on average and has Zacks ETF Rank #3 (Hold) with a High risk outlook.
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Alibaba's AI Launch Puts These ETFs in Spotlight
Alibaba Cloud — the cloud computing entity of the China-based multinational technology conglomerate Alibaba (BABA - Free Report) — recently announced that it will be launching its product Tongyi Qianwen, an AI model similar to ChatGPT.
Per an article published on CNBC, Tongyi Qianwen is set to command Chinese and English language capabilities. The cloud computing entity of Alibaba stated that the product would be available to its customers on the cloud, helping them build customized large language models in an economical way. The AI model is set to be integrated across Alibaba’s various businesses to improve user experience.
Users can soon expect more gripping AI features such as image understanding and text-to-image in the Tongyi Qianwen model, as stated by Alibaba Cloud. Following the revelation of Chinese company Baidu’s (BIDU - Free Report) own ChatGPT version, Ernie Bot, last month, Alibaba is the latest Chinese tech giant looking to enter in the AI domain.
What Lies Ahead?
The tech conglomerate saw its share price rise right after the announcement, but the price was pulled back shortly. However, the future impact of the AI model on Alibaba’s business depends upon the Chinese cyberspace regulator, Cyberspace Administration of China (“CAC”). The cyberspace watchdog revealed draft measures early this week for administering AI generation services.
As per a Reuters article, CAC stated that increased investments in emerging technology and its consumer popularity should be in line with China’s core socialist views. However, the country does encourage innovation and application of the AI technology. CAC stated that a penalty would be imposed on the providers if the guidelines of the regulator are not adhered to, facing the risk of having their services suspended or even undergoing a criminal investigation.
Initiative by Alibaba
In late March, Alibaba had announced a reorganization to split its business into six, which escalated the share price by nearly 14%. Many analysts believe that this decision by the tech conglomerate may result in a likely boost in valuation and help in safeguarding against regulations. However, this may come at the cost of economies of scale. (Read: Alibaba Shares Surge on Restructuring News: ETFs in Focus)
ETFs in Focus
Alibaba currently has a Zacks Rank #3 (Hold) and belongs to a top-ranked Zacks industry (in the top 35%). Against this backdrop, we highlight a few Alibaba-heavy ETFs for investors who expect the company to gain meaningfully after the introduction of Tongyi Qianwen.
ProShares Online Retail ETF (ONLN - Free Report)
The ProShares Online Retail ETF seeks investment results, before fees and expenses, which tracks the performance of the ProShares Online Retail Index. The fund has a basket of 25 securities with 11.93% exposure in Alibaba.
ONLN has an asset base of $102.49 million and charges an annual fee of 58 bps. It has a traded daily average volume of about 48,000 shares.
First Trust Dow Jones International Internet ETF (FDNI - Free Report)
The First Trust Dow Jones International Internet ETF seeks investment results that generally correspond to that of the Dow Jones International Internet Index. The index measure the performance of the 40 largest and most actively traded non-U.S. international companies in the Internet industry that are engaged in Internet commerce and Internet services. The fund has 10.8% exposure in Alibaba, making it the top holding in FDNI.
It has a basket of 41 securities and an asset base of $31.71 million. Charging an annual fees of 65 bps, the fund trades in an average daily volume of about 6,200 shares.
Global X Emerging Markets Internet & E-commerce ETF
The Global X Emerging Markets Internet & E-commerce ETF provides investment results that generally correspond to the price and yield performance of the Nasdaq CTA Emerging Markets Internet & E-commerce Net Total Return Index. The fund has a basket of 42 securities with an exposure of 8.86% in Alibaba, making it the top holding in EWEB. The fund has the highest allocation in China, with 64.6%.
The fund has gathered an asset base of $2.62 million and charges an annual fees of 65 bps. It has a traded daily average volume of about 1,100 shares and a Zacks ETF Rank #4 (Sell).
Invesco Golden Dragon China ETF (PGJ - Free Report)
The Invesco Golden Dragon China ETF is based on the NASDAQ Golden Dragon China Index, comprising 38 U.S. exchange-listed stocks of companies that derive a majority of their revenues from the Peoples Republic of China. The fund holds 64 securities in its basket and has an 8.95 allocation in Alibaba. The tech giant is the top holding of the fund.
PGJ has amassed $217.31 million in its asset base and charges an annual fee of 70 bps. PGJ trades about 71,000 shares a day, on average and has Zacks ETF Rank #3 (Hold) with a High risk outlook.