Expectations are growing that China could lead the artificial intelligence race against the United States, shifting attention to Southeast Asian AI stocks. The gap between US and Chinese AI models is closing. In 2024, the US produced 40 notable models, while China contributed 15.

Cost Advantage of Chinese AI Models

Chinese AI models have a significant cost advantage. As a result, US startups like Airbnb prefer Chinese options, such as Alibaba’s Qwen AI, due to lower prices compared to their US equivalents. In 2025, Alibaba’s stock surged over 90%, thanks to heavy investment in AI infrastructure and widespread model adoption. Baidu has also seen stock growth of over 40%. The company is expanding its AI-powered robotaxi services, expected to further increase its revenue. Tencent has capitalized on early AI adoption across healthcare, gaming, and other sectors, establishing itself as a vital AI leader.

JD.com and iFlytek Driving Growth

JD.com is using AI to enhance its eCommerce services and continues to be a major player with growth potential. iFlytek specializes in voice recognition and R&D, and is expanding its presence into Europe to find more growth opportunities. China’s AI industry offers many investment possibilities, with significant potential for development into 2026 and beyond. The rise of cost-effective Chinese AI models urges us to rethink our strategies. With Alibaba’s 90% rise in 2025, its implied volatility is likely high. Instead of purchasing pricey outright calls on BABA, we should consider selling cash-secured puts at lower strike prices. This could earn us premium income or allow us to buy the stock if there’s a pullback. Baidu’s story focuses on its specific growth drivers, such as expanding robotaxi services into markets like Hong Kong and Dubai. This targeted growth makes bull call spreads an appealing, low-risk way to benefit from expected positive news in the coming weeks. Recent data has further increased the projected size of the global robotaxi market, supporting a cautious but optimistic approach. Tencent’s extensive AI integration in stable areas such as gaming and fintech provides another opportunity. Its large scale makes it a candidate for income generation through covered call strategies on existing long positions. Recent quarterly data revealed that Tencent’s AI-driven fraud detection reduced fraudulent transactions on WeChat Pay by over 25%, highlighting the value of its embedded AI. We must also consider the wider geopolitical risks in the US-China AI race. The potential for renewed chip restrictions from the US Commerce Department poses a real threat to the sector. A wise hedge would be to buy puts on a broad semiconductor ETF, like SOXX, to safeguard our long positions in Chinese AI against any sudden policy changes. iFlytek is an interesting potential catch-up play. Its focus on R&D indicates future growth catalysts might be on the way. Long-dated call options, known as LEAPS, could provide a means to position for a breakout later in the year without requiring significant capital upfront. This approach allows us to benefit if its planned expansion in Europe gains momentum and starts to positively impact revenue growth. Create your live VT Markets account and start trading now.

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