In China's hyper-competitive AI arena, Alibaba Group Holding Ltd. has outpaced Tencent Holdings Ltd. with the sheer speed of rollouts and user growth. But the latter firm is now seizing the initiative as agentic AI fever grips the country.
Tencent in just the past week introduced several signature products aimed at tapping a national enthusiasm for AI agents like OpenClaw -- automated services that perform real-world tasks. They underscore an initial advantage for the WeChat operator: it's grouped China's entire universe of apps onto a single platform with 1.4 billion users. The company is now working to integrate its own AI agent into WeChat, automating tasks like hailing a ride or booking restaurants, according to a person familiar with the matter. The service could be launched as soon as next month, depending on computing constraints, the person said, asking not to be identified discussing private information.
That presents a challenge for Alibaba, which leads Chinese large language model makers in open-source but has so far struggled to translate that into a significant commercial lead. Just this month, Alibaba lost a star model developer, raising questions about the company's broader approach to AI. The company this week unveiled a big corporate restructuring to refocus on profiting from the technology.
Investors are beginning to place bets on the outcome of that race. Tencent -- which since 2025 had lagged Alibaba in stock market gains -- has climbed 6% since it launched its agentic AI services Qclaw and Workbuddy, setting the stock up for its best monthly performance against Alibaba in two years.
"This is a year that globally AI agents will become a very important form factor," said Kevin Xu, a tech investor and founder of Interconnected Capital. "This should be the time that the Tencent kind of product excellence could shine."
China's two largest tech companies report earnings back-to-back starting Wednesday. Investors have punished Tencent for lagging behind Alibaba in China's AI race, but its push into agentic AI is reshaping the narrative. Since the release of QClaw and WorkBuddy -- targeted at professional users -- Tencent has gained almost $35 billion of market value.
Tencent is well-positioned to build agentic AI because of its unparalleled access to troves of user data and sprawling WeChat ecosystem. Such services work best when granted access to users' information and a wealth of apps.
In a sign of Tencent's renewed focus, the normally publicity-averse founder Pony Ma has used his own WeChat feed to promote QClaw and Workbuddy, according to local media reports.
"Tencent's strength lies in Weixin's (WeChat's) entrenched role across communication, discovery, payment, and fulfillment," JPMorgan Chase & Co. analysts including Alex Yao wrote in a note last week. That's a high bar for rivals to match," he added.
Tencent now boasts 64 buy recommendations, making it the most favored stock in Asia, according to Bloomberg data. Alibaba holds around 48. At a multiple of 15 to 16 times earnings, both trade at a discount to American peers such as Nvidia Corp. and Amazon.com Inc., which command price-to-earnings ratios above 20.
In terms of raw performance, Alibaba's Qwen family of models rank alongside offerings from Anthropic PBC and OpenAI on benchmarking leaderboards, triggering a wave of adoption in the open-source community. Those models also empower its namesake consumer app, evolving from a chatbot into an all-in-one platform that connects with Alibaba's online shopping universe. The company is also experimenting with hardware, including Qwen glasses.
But this month's surprise departure of Junyang Lin, the top developer for Qwen models and one of the most influential figures behind Alibaba's transition to AI, raised questions about the company's approach to cutting-edge research. The exact reasons for his exit remain unclear. At the same time, tension between Lin's tightly controlled research team and Alibaba Cloud had been brewing before his surprise resignation, with complaints of poor communication involving his team, according to people familiar with the matter.
Some people within Alibaba view the latest Qwen3.5 offering as underwhelming, the people added. In recent months, Alibaba hired Zhou Hao from Google DeepMind to work on the development of the Qwen model, they said. It's unclear if Zhou and Lin's responsibilities overlapped.
Tencent has steered clear of matching Alibaba's AI spending targets, and its main consumer-facing app, Yuanbao, remains largely a siloed effort. Former OpenAI researcher Yao Shunyu - appointed Tencent's chief AI scientist in December - is now tasked with advancing its Hunyuan model to narrow the lead held by Chinese peers like Qwen and ByteDance Ltd.'s Seed.
The frenetic pace of China's AI race was on full display during the weeklong Lunar New Year break last month. Alibaba, ByteDance, Tencent, and Baidu Inc. spent a combined 8 billion yuan ($1.2 billion) to promote AI apps through cash giveaways, subsidies, and media buys, according to estimates by Morgan Stanley.
While all platforms achieved significant short-term user growth during the holiday, Yuanbao recorded the sharpest retreat, with daily active users falling back close to pre-campaign levels. Qwen's usage remained well above pre-campaign levels, thanks to longer voucher validity, the analysts wrote in a note.
In the long run, Tencent hopes to integrate AI more closely with WeChat -- known as Weixin in China -- the social media, entertainment and gaming platform that underpins its entire business. Executives have said that they aim to evolve WeChat into a full-fledged agentic service, or a digital assistant. The Information earlier reportedBloomberg Terminal about Tencent's plans to integrate agentic AI with WeChat.
"The blue-sky scenario is that eventually Weixin, with an AI agent, can help a user do a lot of tasks," President Martin Lau told analysts in November. "At this time, this is at a very early stage of development."