TENCENT HLDGS UNSP/ADR

Tencent Holdings’ TCEHY shares have declined 3.9% since the company reported first-quarter 2026 results on May 13. The downtrend can be attributed to the quarter's top-line and bottom-line misses, with the later timing of the Spring Festival shifting a portion of games-related revenue recognition out of the first quarter and weighing on reported growth despite solid underlying demand.
Tencent reported earnings of $1.06 per share, missing the Zacks Consensus Estimate by 0.93%. In domestic currency, earnings were RMB 7.364 per share, up 12% year over year.
In dollar terms, Tencent reported revenues of $28.36 billion, missing the Zacks Consensus Estimate by 4.94%. Net revenues increased 9% year over year to RMB 196.5 billion. Adjusting for the Spring Festival timing shift, total revenue growth would have been 11% year over year. Combined MAU of Weixin and WeChat increased 2% year over year to 1,432 million, underscoring resilient engagement as Tencent scaled newer AI-led initiatives.
Gaming Metric Details
Domestic Games revenue grew 6% year over year to RMB 45.4 billion, with revenue growth lagging gross receipts growth as the later timing of the Spring Festival deferred a portion of revenue recognition into subsequent periods.
Key drivers included Honor of Kings, Peacekeeper Elite, Delta Force and VALORANT Mobile, with both Honor of Kings and Peacekeeper Elite achieving lifetime highs in quarterly gross receipts. Peacekeeper Elite recorded a peak DAU of 90 million with gross receipts rising more than 30% year over year.
International Games revenue increased 13% year over year to RMB 18.8 billion, primarily driven by Clash Royale, Wuthering Waves and VALORANT PC. Newer release Roco Kingdom: World, launched March 26, achieved more than 13 million average DAUs in its first month and sustained high user retention rates. Social Networks revenue declined 2% year over year to RMB 31.9 billion, reflecting the Spring Festival timing impact on domestic app-based game item sales.
TCEHY Sees Broad-Based Segment Growth
Marketing Services revenue rose 20% year over year to RMB 38.2 billion, accelerating from 17% growth in the fourth quarter of 2025, supported by AI-driven ad recommendation upgrades and expanded closed-loop marketing capabilities within the Weixin ecosystem.
FinTech and Business Services revenue increased 9% year over year to RMB 59.9 billion, with FinTech Services benefiting from higher commercial payment and wealth management revenues, while Business Services was led by stronger cloud demand, including AI-related services and higher eCommerce technology service fees tied to Mini Shops GMV.
Operating Details of TCEHY
Gross profit rose 11% year over year to RMB 111.3 billion, with gross margin expanding 100 basis points to 57%. Selling and marketing expenses increased 44% year over year to RMB 11.3 billion, reflecting higher promotional spending to support the growth of new AI native applications and game launches. R&D expenses rose 19% year over year to RMB 22.6 billion, driven by increased AI investment, including higher equipment depreciation and associated operating costs, as well as higher headcount.
Operating profit was RMB 75.6 billion, up 9% year over year, with the operating margin largely stable at 38.5%. Excluding new AI products, operating profit was RMB 84.4 billion, up 17% year over year, with the corresponding operating margin expanding to 43% from 39.9%. Net profit attributable to equity holders was RMB 67.9 billion, up 11% year over year.
TCEHY Pushes Hy and Productivity AI Agents
TCEHY opened 2026 emphasizing progress on new AI products and broader deployment across core businesses. The Hy3 preview model, developed on re-architected AI infrastructure, has been top ranked in OpenRouter token measurements since April 28. WorkBuddy is currently the most widely used productivity AI agent service in China, while Marketing Services acceleration continued to benefit from AI-driven ad recommendation improvements and stronger closed-loop tools within Weixin.
TCEHY's Balance Sheet Details
As of March 31, 2026, Tencent had RMB 217.8 billion in cash and cash equivalents compared with RMB 141 billion as of Dec. 31, 2025. The company had restricted cash of RMB 7.6 billion and term deposits of RMB 205.5 billion.
For the first quarter of 2026, capital expenditures were RMB 31.9 billion compared with RMB 19.6 billion in the prior quarter, reflecting an accelerated pace of server infrastructure investment.
Free cash flow was RMB 56.7 billion, up 67% quarter over quarter and 20% year over year, driven by growth in games gross receipts and advertising billings, partly offset by higher server infrastructure and compute spending.
Total cash increased 12% to RMB 533.7 billion, and net cash position totaled RMB 146.9 billion, up 63%, giving the company flexibility to fund growth priorities.
The company repurchased approximately 12.7 million shares on the Hong Kong Stock Exchange for an aggregate consideration of HKD 7.6 billion during the quarter.
Tencent’s Rank & Stocks to Consider
Currently, TCEHY carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Computer and Technology sector are Broadcom AVGO, Celestica CLS and Amphenol APH, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Broadcom have appreciated 22.9% year to date. The Zacks Consensus Estimate for Broadcom’s 2026 earnings is pegged at $11.45 per share, up by a penny over the past 30 days, indicating a year-over-year surge of 67.9%.
Shares of Celestica have appreciated 21.3% year to date. The Zacks Consensus Estimate for Celestica’s 2026 earnings is pegged at $10.16 per share, up 15.1% over the past 30 days, indicating a year-over-year jump of 67.9%.
Amphenol shares have declined 7.5% year to date. The Zacks Consensus Estimate for APH’s 2026 earnings is pegged at $4.76 per share, up 11.4% over the past 30 days, indicating a year-over-year increase of 42.5%.
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TCEHY Stock Declines 4% as Q1 Earnings and Revenues Miss Estimates

Key Points
Nvidia will announce its fiscal 2027 first quarter on Wednesday, May 20.
The company expects revenue of about $78 billion, 15% higher than just last quarter.
Today's drop comes as investors were disappointed there was no major China announcement.
Nvidia (NASDAQ: NVDA) shares sank as much as 5% today, outpacing a marketwide pullback. As of 12:23 p.m. ET, Nvidia stock was still down 3.3%, while the Nasdaq Composite index was down 1.25%.
Today's drop comes after the latest leg higher for the artificial intelligence (AI) leader's stock. Nvidia has surged more than 15% in the last month. With its highly anticipated earnings report due next week, today's drop might be a nice time to gain exposure.
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China is just a bonus
Nvidia is dropping more than the market today after there was no new announcement regarding its business in China, following CEO Jensen Huang's visit with President Trump there this week. Nvidia's H200 chips can now be sold in China, but no major orders have been announced. That may be because Chinese companies are finding a more adequate supply of AI chips domestically.
Chinese tech giants Tencent and Alibaba have recently said they expect increased production and supply of Chinese chips this year, along with greater use of in-house technology. That's not great news for Nvidia.
But Nvidia's guidance has assumed no China business. Any sales of its lower-tier H200 chips there would only add to its financial results. Investors should consider that a bonus, if Nvidia does attain new business there.
In the meantime, its sales continue to soar elsewhere. Nvidia has been beating its already lofty guidance in recent quarterly reports. If it exceeds estimates again in its report being released Wednesday, May 20, after the bell, Nvidia stock could resume its move higher. That would make today's dip a timely buying opportunity.
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Howard Smith has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Tencent. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Nvidia Stock Sank Today. Is It a Buy With Earnings Due Next Week?

Key Points
Opportunities continue to mount for the AI chipmaker.
Several Wall Street analysts have increased their price targets ahead of the company's financial report next week.
Shares of Nvidia (NASDAQ: NVDA) were sharply higher on Thursday, climbing as much as 4.7% to a new all-time high. As of 2:12 p.m. ET, the stock was still up 3.8%.
There was a tidal wave of positive news that sent the artificial intelligence (AI) chipmaker higher, all of which bodes well for Nvidia's future.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Let the chips fall where they may
President Donald Trump traveled to Beijing this week for a far-reaching summit with Chinese President Xi Jinping. Several U.S. business leaders, including Nvidia CEO Jensen Huang, accompanied Trump.
Reports have emerged that several high-profile Chinese companies have been approved to purchase Nvidia's H200 AI chips, including Alibaba, Tencent Holdings, ByteDance, and JD.com, according to Reuters.
Huang believes the Chinese AI chip market could be worth as much as $50 billion to Nvidia, making this a big win for the company.
Moreover, several of Wall Street's finest issued higher price targets ahead of Nvidia's earnings report next week.
Cantor Fitzgerald analyst C.J. Muse increased his price target on Nvidia to $350, up from its previous level of $300, while maintaining an overweight (buy) rating on the stock. That represents potential gains for investors of 55% compared to Wednesday's closing price. The analyst noted that Nvidia's AI chips are likely sold out for the current fiscal year and believes investors are underestimating the company's earnings potential over the next few years.
UBS analyst Timothy Arcuri raised his price target to $275 from $245 while maintaining a buy rating on Nvidia stock. The analyst believes expectations are conservative heading into Nvidia's quarterly financial report, opening the door for a beat-and-raise quarter.
I think the analysts hit the nail on the head. Nvidia has a long track record of blowing past Wall Street's consensus estimates, and I believe this quarter will be no exception. Moreover, Nvidia generated $216 billion in revenue in fiscal 2026 (ended Jan. 25). If the company can successfully reenter the Chinese market, it could increase its annual revenue by another 23%.
At 28 times forward earnings and 21 times next year's expected earnings, investors can get Nvidia stock for a song, which is why I believe it's an unqualified buy -- and it could go much higher.
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Danny Vena, CPA has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Tencent. The Motley Fool recommends Alibaba Group and JD.com. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Why Nvidia Stock Hit a New All-Time High Today, and Why There's Likely More to Come

Pre-market futures are off their early-morning highs at this hour, but early-bird investors are doing their best to parse the latest inflation report out this morning. The Dow is -175 points, the S&P 500 is +3 points, the Nasdaq is +109 points, while the small-cap Russell 2000 is -2 points currently.
PPI Wholesale Inflation Jumps to Highest Levels in 4 Years
A day following the Consumer Price Index (CPI) for April, which is the retail print on inflation, this morning we get the Producer Price Index (PPI), the wholesale side of the equation. It’s fair to say these numbers have spiked — month over month, year over year and compared to expectations.
Headline PPI month over month pole-vaulted to +1.4%, nearly 3x the +0.5% anticipated, and double the upwardly revised +0.7% for March. This is the highest level we’ve seen since March 2022 — the same month Russia invaded Ukraine and the Fed finally began raising interest rates — which, at +1.7%, was an all-time high. Strip out volatile food and energy prices, the core read also triples expectations: +1.0%, from +0.3% forecast and +0.2% reported for March.
For the year-over-year numbers, we expected a jump of about 80 or 90 basis points (bps), but PPI year over year far outpaced those estimates: +6.0%. It’s 170 bps above the upwardly revised +4.3% from March, which itself was the first “4-handle” in more than three years. We were last at these inflation levels on the wholesale side in December of 2022, when figures were cascading downward of that summer’s peak. Core PPI year over year reached +5.2%, 120 bps above the upwardly revised +4.0% for March.
Even when we parse this data further — subtracting food, energy and trade from headline PPI — we’re still +0.6% month over month and +4.4% year over year. These figures are far afield from optimal inflation rates suggested by the Jerome Powell-led Fed. Incoming Fed Chair Kevin Warsh, who will preside over his first FOMC meeting a month from now, will have a difficult time convincing voting Fed members to cut rates in such an environment.
Most troubling, perhaps, is that we appear to still be on the visible side of the iceberg. The Strait of Hormuz has “only” been effectively closed for two months or so, and oil reserve drawdowns in most advanced nations have so far kept this condition from acutely affecting the global economy. But another two months of this, once the drawdowns have become more exhausted? Where would we be then?
Bond Market Reacts to PPI Inflation
Almost immediately, the 2-year bond yield jumped to +4.0%, and the 10-year climbed closer to +4.5%. This followed yesterday’s close on the 10-year at highs last seen in June of last year. Similarly with the 2-year: even though we have touched +4% momentarily in the last couple months or so, we last swam in these waters meaningfully last summer.
These are clearly higher levels than the current Fed funds rate of 3.50-3.75%. Assuming these oil supply conditions are tamed very quickly for a meaningful length of time (fingers crossed for President Trump’s meeting today in China with President Xi Jenpeng), we might consider holding these levels to be the most responsible course of direction. Currently, expectations are for the next Fed move to be a rate HIKE, not a cut (+32% chance in December, +59% chance in April of next year).
Earnings Results at a Glance: BABA, CSCO & More
Ahead of today’s open, we saw two Chinese companies — Alibaba BABA and Tencent TCEHY — miss earnings expectations by massively different amounts: -92% for BABA, -$0.01 for Tencent. Closer to home, Birkenstock BIRK posted a big earnings miss: -15.7%.
After today’s close, Cisco Systems CSCO becomes the next big tech name to put out quarterly results. Expectations are for +8.3% earnings growth from a year ago on +10% higher revenues. Cisco always beats earnings estimates, but never by a gigantic amount.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

April PPI Touches Highest Level Since March 2022

Wednesday, May 13th, 2026
Pre-market futures are off their early-morning highs at this hour, but early-bird investors are doing their best to parse the latest inflation report out this morning. The Dow is -175 points, the S&P 500 is +3 points, the Nasdaq is +109 points, while the small-cap Russell 2000 is -2 points currently.
PPI Wholesale Inflation Jumps to Highest Levels in 4 Years
A day following the Consumer Price Index (CPI) for April, which is the retail print on inflation, this morning we get the Producer Price Index (PPI), the wholesale side of the equation. It’s fair to say these numbers have spiked — month over month, year over year and compared to expectations.
Headline PPI month over month pole-vaulted to +1.4%, nearly 3x the +0.5% anticipated, and double the upwardly revised +0.7% for March. This is the highest level we’ve seen since March 2022 — the same month Russia invaded Ukraine and the Fed finally began raising interest rates — which, at +1.7%, was an all-time high. Strip out volatile food and energy prices, the core read also triples expectations: +1.0%, from +0.3% forecast and +0.2% reported for March.
For the year-over-year numbers, we expected a jump of about 80 or 90 basis points (bps), but PPI year over year far outpaced those estimates: +6.0%. It’s 170 bps above the upwardly revised +4.3% from March, which itself was the first “4-handle” in more than three years. We were last at these inflation levels on the wholesale side in December of 2022, when figures were cascading downward of that summer’s peak. Core PPI year over year reached +5.2%, 120 bps above the upwardly revised +4.0% for March.
Even when we parse this data further — subtracting food, energy and trade from headline PPI — we’re still +0.6% month over month and +4.4% year over year. These figures are far afield from optimal inflation rates suggested by the Jerome Powell-led Fed. Incoming Fed Chair Kevin Warsh, who will preside over his first FOMC meeting a month from now, will have a difficult time convincing voting Fed members to cut rates in such an environment.
Most troubling, perhaps, is that we appear to still be on the visible side of the iceberg. The Strait of Hormuz has “only” been effectively closed for two months or so, and oil reserve drawdowns in most advanced nations have so far kept this condition from acutely affecting the global economy. But another two months of this, once the drawdowns have become more exhausted? Where would we be then?
Bond Market Reacts to PPI Inflation
Almost immediately, the 2-year bond yield jumped to +4.0%, and the 10-year climbed closer to +4.5%. This followed yesterday’s close on the 10-year at highs last seen in June of last year. Similarly with the 2-year: even though we have touched +4% momentarily in the last couple months or so, we last swam in these waters meaningfully last summer.
These are clearly higher levels than the current Fed funds rate of 3.50-3.75%. Assuming these oil supply conditions are tamed very quickly for a meaningful length of time (fingers crossed for President Trump’s meeting today in China with President Xi Jenpeng), we might consider holding these levels to be the most responsible course of direction. Currently, expectations are for the next Fed move to be a rate HIKE, not a cut (+32% chance in December, +59% chance in April of next year).
Earnings Results at a Glance: BABA, CSCO & More
Ahead of today’s open, we saw two Chinese companies — Alibaba BABA and Tencent TCEHY — miss earnings expectations by massively different amounts: -92% for BABA, -$0.01 for Tencent. Closer to home, Birkenstock BIRK posted a big earnings miss: -15.7%.
After today’s close, Cisco Systems CSCO becomes the next big tech name to put out quarterly results. Expectations are for +8.3% earnings growth from a year ago on +10% higher revenues. Cisco always beats earnings estimates, but never by a gigantic amount.
Questions or comments about this article and/or author? Click here>>
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners Up
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
Tencent Holding Ltd. (TCEHY) : Free Stock Analysis Report
Birkenstock Holding PLC (BIRK) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

PPI Sees Wholesale Inflation Shoot Up to +6.0%

Key Points
AMD's first-quarter results sailed past Wall Street's estimates.
The company's Q2 outlook also outpaced expectations.
The results show that AI adoption continues to ramp higher.
Advanced Micro Devices (NASDAQ: AMD) has been on a blistering run in 2026. Despite getting a slow start, the stock has gained 63% over the past month as bullish sentiment for artificial intelligence (AI) began to recover. There was a lot riding on AMD's results, and shareholders were sitting on the edge of their seats ahead of the chipmakers quarterly financial report -- and the company delivered.
For the first quarter, AMD generated revenue that grew 38% year over year to $10.25 billion, driving adjusted earnings per share (EPS) of $1.37, which surged 43%.
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For context, analysts' consensus estimates called for revenue of $9.91 billion and adjusted EPS of $1.29, so AMD cleared both hurdles with room to spare.
The company's gross profit margin expanded by 300 basis points year over year to 53%, while operating expenses grew more slowly than revenue, driving higher profits to the bottom line. On a GAAP basis, net income surged 95% to $1.38 billion, driven higher by its operating margin that expanded 300 basis points to 14%.
AMD chair and CEO Dr. Lisa Su called it an "outstanding quarter," noting that the results were driven by "accelerating demand for AI infrastructure, with data center now the primary driver of our revenue and earnings growth." The chief executive went on to say, "We are seeing strong momentum as inferencing and agentic AI drive increasing demand for high-performance CPUs and accelerators."
Indeed, the data center segment results tell the tale, as revenue jumped 57% year over year to $5.8 billion. AMD saw strong demand for its Epyc CPUs and Instinct GPUs -- which are seeing strong data center demand.
In all, the solid combination of accelerating revenue, expanding margins, and record free cash flow helped lift AMD stock in after-hours trading, up nearly 8% as of 5:37 p.m. ET.
The future is looking up
AMD suggested there's likely more to come. The company highlighted a recent deal with Meta Platforms to deploy 6 gigawatts (GW) of AMD Instinct GPUs. The first GW will be powered by a custom AMD Instinct MI450-based GPU. Meta is also first in line for AMD's upcoming 6th-generation Epyc CPUs.
The company also cited recent collaborations with Amazon Web Services (AWS), Alphabet's Google Cloud, Microsoft Azure, and Tencent Holdings to deploy new and expanded 5th-generation Epyc-powered cloud instances. It highlighted other such deals, but you get the picture.
AMD also noted that customer forecasts are exceeding management's initial expectations. That, combined with the growing number of large-scale deployments and strong demand for its MI450 AI chips and Helios rack-scale servers, is giving the company greater visibility into future growth.
To that end, the company's outlook was more bullish than what Wall Street expected. For the second quarter, AMD's outlook calls for revenue growth of 46% to $11.2 billion at the midpoint of its guidance, far outpacing the $10.5 billion investors anticipated.
At 134 times earnings, AMD is pricey, particularly on the heels of the stock's 63% rise over the past month. However, this ignores the company's accelerating growth rate. Using the more appropriate price/earnings-to-growth (PEG) ratio -- which factors in the company's growth -- returns a multiple of 0.82, when any number less than 1 signals an undervalued stock.
The increasing adoption of AI opens the door to multiple winners in the data center chip space, and AMD has its foot in the door. So, despite its seemingly lofty price tag, the stock is deserving of a premium. That's why AMD is a buy.
Should you buy stock in Advanced Micro Devices right now?
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Danny Vena, CPA has positions in Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Tencent. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

AMD Stock Investors Just Got Fantastic News From CEO Lisa Su -- and There Could Be More to Come

Key Points
State Street Advisors expect the S&P Small Cap 600 and the MSCI Emerging Markets indexes to beat the S&P 500 over the next three to five years.
State Street argues small cap and emerging market stocks will outperform due to strong earnings growth and cheaper valuations.
The S&P 500 crushed the S&P Small Cap 600 and the MSCI Emerging Markets indexes over the past decade, and the same outcome is possible over the next decade.
In April, State Street updated its long-term asset class forecasts. The S&P 500 (SNPINDEX: ^GSPC) is projected to return 7.1% annually during the next three to five years, while the S&P Small Cap 600 and MSCI Emerging Markets indexes are projected to return 7.6% and 7.5% annually, respectively.
Investors can get exposure to those indexes by purchasing shares of the Vanguard S&P Small-Cap 600 ETF (NYSEMKT: VIOO) and the iShares MSCI Emerging Markets ETF (NYSEMKT: EEM). Here are the important details.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Vanguard S&P Small-Cap 600 ETF
The Vanguard S&P Small-Cap 600 ETF tracks 600 U.S. companies that meet the definition of small-cap stock, which currently includes equities with market values ranging from $1.2 billion to $8 billion. The index fund owns stocks from all 11 market sectors, but its assets are concentrated in financial (18%), industrial (17%), consumer discretionary (13%), and technology (12%) stocks.
The five largest positions in the Vanguard S&P Small-Cap 600 ETF are as follows.
Eastman Chemical: 0.5%
Element Solutions: 0.5%
Primoris Services: 0.5%
Viavi Solutions: 0.5%
Argan: 0.4%
The Vanguard S&P Small-Cap 600 ETF returned 180% (10.8% annually) in the past decade, while the S&P 500 posted a total return of 315% (15.2% annually). One reason small-cap stocks underperformed during that period was high interest rates, which typically have a disproportionate impact on small businesses because they rely more heavily on floating-rate debt.
The Vanguard S&P Small-Cap 600 ETF has a reasonable expense ratio of 0.07%, meaning shareholders will pay $7 annually over every $10,000 invested. While that is well below the average for U.S. index funds, it is still more expensive than the 0.03% expense ratio of the Vanguard S&P 500 ETF.
iShares MSCI Emerging Markets ETF
The iShares MSCI Emerging Markets ETF tracks about 1,225 companies across emerging market economies. It's most heavily exposed to China, Taiwan, South Korea, and India, but also includes stocks from Brazil, South Africa, and Saudi Arabia. The fund has a large percentage of its assets invested in three sectors: technology (32%), financials (21%), and consumer discretionary (10%).
The five largest positions in the iShares MSCI Emerging Markets ETF are as follows.
Taiwan Semiconductor: 14.1%
Samsung Electronics: 6%
SK Hynix: 4%
Tencent: 3.2%
Alibaba Group: 2.3%
The iShares MSCI Emerging Markets ETF returned 133% (8.8% annually) in the last decade, while the S&P 500 posted a total return of 315% (15.2% annually). The primary reason U.S. stocks outperformed over that period was the dominance of U.S. technology stocks, particularly the "Magnificent Seven" stocks.
The iShares MSCI Emerging Markets ETF has a relatively high expense ratio of 0.72%, which means investors will pay $72 annually on every $10,000 invested in the fund.
Why investors should still prioritize an S&P 500 index fund (or U.S. large-cap stocks)
State Street believes U.S. small-cap stocks will beat the S&P 500 (U.S. large-cap stocks) in the next three to five years because of cheaper valuations and strong earnings growth. Indeed, small-cap earnings in 2026 are forecast to grow faster than large-cap earnings for the first time in years, according to FactSet Research.
However, small-cap companies are also more vulnerable to high interest rates, and the Iran war has made interest rate cuts much less likely. Investors entered the year expecting the Federal Reserve to cut rates by at least 50 basis points, so the Vanguard S&P Small-Cap 600 ETF has more than doubled the return of the S&P 500 in 2026. But if rate cuts fail to materialize, that outperformance could reverse.
Meanwhile, State Street also believes emerging market equities will outperform the S&P 500 over the next three to five years due to the devaluation of the U.S. dollar (which increases investment returns denominated in foreign currencies when converted back to U.S. currency), strong earnings growth, and relatively cheap valuations.
However, the vast majority of the largest technology companies are domiciled in the U.S., which means the U.S. economy is arguably best positioned to benefit from the artificial intelligence revolution. In turn, U.S. stocks (especially large-cap stocks in the S&P 500) may continue to outperform emerging market equities in the coming years.
Here's the bottom line: I think State Street makes good arguments for owning small-cap and emerging market funds, but I would still prioritize an S&P 500 index fund (or U.S. large-cap stocks) over those options. The S&P 500 offers exposure to the most consequential companies in the world, which makes it a very compelling long-term investment.
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Trevor Jennewine has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends FactSet Research Systems, Taiwan Semiconductor Manufacturing, Tencent, Vanguard S&P 500 ETF, and Viavi Solutions. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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Buy 2 Index Funds to Beat the S&P 500 in the Next 5 Years, According to Wall Street Analysts

Would you believe that the best way to play China's AI ambitions may be a South African stock?
Artificial intelligence has the potential to change the economy. As such, investors should have exposure to some AI companies in their portfolios -- and that includes Chinese exposure. Even Nvidia CEO Jensen Huang recently noted that China is home to half of the world's AI researchers. And the January unveiling of the groundbreaking DeepSeek R1 model showed how China is able to innovate cutting-edge AI, even with limited silicon access.
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Nevertheless, investing in China carries risks pertaining to its economy, its government, and the market mechanics of owning Chinese stocks. That's why the best way to expose oneself to Chinese AI may be South African holding company Naspers (OTC: NPSNY).
Tencent may be the best Chinese AI company in the long run
It's still very early in the AI races, and in truth, it's hard to know who is going to win out. It could be an upstart AI lab such as DeepSeek in China or OpenAI in the U.S., or one of the existing big tech giants.
In this investor's opinion, the existing incumbents are the best bet. These companies have huge technological and financial resources to invest in AI, and AI should also enable existing large businesses to boost revenue and lower costs through better automation and data science.
That's why Tencent (OTC: TCEHY) seems like good bet to be a big winner from Chinese AI. Tencent has the largest social media platform in China in WeChat, with more than 1.4 billion users. It's also the largest video game publisher in the China, the largest video and music streaming company, one of the two large digital payments companies, and one of China's cloud computing giants.
In addition, Tencent is building its own large model, called Hunyuan, which could lead to vast new AI opportunities if it ends being more performant than DeepSeek and other competitors over time.
And Prosus/Naspers is the better way to play Tencent
Tencent stock doesn't trade on U.S. stock exchanges, but it does trade over the counter as an American depositary receipt. However, a better way to play Tencent may be through its largest shareholder, European-domiciled Prosus (OTC: PROSY), which owns more than 23% of Tencent's stock. And the best way to invest in Prosus may be in its largest shareholder, Naspers, which owns 43% of Prosus.
Naspers is a 110-year-old South African media company that was fortunate enough to invest in Tencent when it was just a startup in 2001. That investment eventually grew to be worth hundreds of billions, dwarfing Naspers' original business.
Naspers then sold portions of its Tencent stake over time, investing in new businesses across food delivery, fintech, classifieds, e-commerce, ed-tech, and other tech startups.
However, Naspers began to trade at a huge discount to the value of not only its net assets but also its Tencent stake alone. Management attributed that growing discount to its large size relative to the Johannesburg Stock Exchange. The thinking was that large index funds cap their asset weightings, which meant they had to sell Naspers stock once it reached a certain-sized allocation.
In 2019, Naspers created Prosus, a new entity it listed on the larger Euronext Exchange in Amsterdam, and spun it off to shareholders. Today, Naspers owns about 43% of Prosus, which owns all of Naspers' assets outside of South Africa, while Naspers owns some small additional South African assets on its own.
The plan didn't really work, though, as, Prosus still trades at a 30% discount its total net assets and even a 9% discount to the value of its Tencent stake alone. Meanwhile, Naspers trades at an even bigger 36% discount to the value of its assets, which is mainly just its 43% stake in Prosus.
But Naspers'/Prosus' other businesses are now profitable
Owning Tencent at a discount is an attractive proposition, but of course it won't make much of a difference if the valuation gap never closes. That being said, a new development at Prosus could change this dynamic.
Before this year, Prosus' businesses were free cash flow negative, so the company was dependent on Tencent stock sales and Tencent's dividend for cash for funding. However, in fiscal 2025, which ended in March, Prosus' non-Tencent businesses turned free cash flow positive for the first time, excluding Tencent's dividend, generating $36 million in positive free cash flow and improving free cash flow by nearly $1 billion over the past three years.
Prosus also has a new CEO in Fabricio Bloisi, who took over the job exactly one year ago. Bloisi is an entrepreneur and the very successful former CEO of iFood, now the largest food delivery company in Brazil, which Prosus fully acquired back in 2022.
Having a proven startup operator is a contrast with Prosus' prior leadership, and recent results appear to show Bloisi is raising the bar on execution.
Self-funding could mean a valuation rerating
Before today, if Prosus wanted to buy a company or repurchase its stock at a big discount, it would have to sell part of its Tencent stake. That probably played into the "conglomerate discount," as investors may not have liked the capital allocation of selling a high-quality business in Tencent to buy more risky and unprofitable startups.
However, if the other operating businesses continue to grow positive free cash flow outside Tencent, that could change sentiment. Prosus wouldn't have to sell as much or any Tencent stock and could benefit from future compound earnings growth.
If a Prosus/Naspers valuation rerating occurs, that could make Prosus and/or Naspers the most attractive way to play Tencent -- and with it, the growth of Chinese AI.
Should you invest $1,000 in Naspers right now?
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Billy Duberstein and/or his clients have positions in Naspers and Prosus. The Motley Fool has positions in and recommends Nvidia and Tencent. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Is This Stock the Best Way to Play Chinese AI?

Pony AI (NASDAQ: PONY) is leading the race to deploy fully autonomous robotaxis -- and its recent advances could propel the stock to new highs. Discover how partnerships with Uber, Tencent, and Toyota position Pony AI for breakout growth, why analysts are bullish, and what this $1 trillion disruptor might deliver next.
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Stock prices used were the market prices of June 16, 2025. The video was published on June 23, 2025.
Should you invest $1,000 in Pony Ai right now?
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Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tencent and Uber Technologies. The Motley Fool has a disclosure policy. Rick Orford is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link, they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Pony AI: The Next $1 Trillion Robotaxi Play?

Baidu BIDU and Alphabet GOOGL share roots in Internet search and have evolved into global AI heavyweights, each riding the wave of generative AI and cloud services. Baidu, China’s dominant search engine, has leveraged its platform to develop and deploy advanced AI models—like ERNIE 4.5 and ERNIE X1—as well as autonomous driving technology through its Apollo initiative. Alphabet, Google’s parent, spans search, advertising, Cloud, YouTube, and hardware, and is spearheading AI progress with Gemini 2.5, AI-powered Cloud services, and TPUs such as Ironwood.
The recent surge of interest in generative AI and language models has put companies like Baidu and Alphabet in the spotlight. Google’s rollout of AI features (like its Bard/Gemini AI for search) and Baidu’s launch of its ERNIE Bot (an answer to ChatGPT) underscore how both are racing to monetize AI innovations. Investors are wondering which company is better positioned today for upside.
Let's dive deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.
The Case for Baidu Stock
Baidu is the unrivaled search leader in China, controlling roughly 60% of China’s search engine market. This core search dominance provides a massive user base and ad platform akin to Google’s in its home market. Beyond search advertising, Baidu has aggressively invested in next-generation tech: its Apollo autonomous driving unit and Apollo Go ride-hailing service are growing (Apollo Go saw a 75% year-over-year increase in rides in first-quarter 2025), and Baidu’s AI Cloud division is booming with 42% revenue growth in the last reported quarter. AI Cloud's non-GAAP operating margin now sits at the level of teens, aided by improved revenue mix and scale efficiencies.
The company’s focus on full-stack AI infrastructure and rapid model iteration—most notably the release of ERNIE 4.5 Turbo and ERNIE X1 Turbo—has significantly reduced inference costs while enhancing performance. These improvements make Baidu’s AI Cloud offerings highly cost-competitive, especially as enterprise clients increasingly look to deploy Gen AI applications at scale.
Baidu faces several key challenges as it pivots aggressively toward AI. Its online marketing revenue declined 6% year over year, reflecting weakness in its traditional ad business amid a transition to AI-powered search that is not yet fully monetized. While AI-generated content now powers 35% of mobile search results, monetization remains in early testing, putting pressure on near-term revenue and margins. Additionally, Baidu reported negative free cash flow of RMB9.2 billion (excluding iQIYI), driven by rising investments in AI infrastructure, cloud services, and autonomous driving.
The company also faces intensifying competition from rivals like Alibaba BABA and Tencent TCEHY in the AI cloud space, while U.S. restrictions on advanced AI chips could disrupt its infrastructure scale-up. Although Baidu touts flexibility in chip sourcing and strong GPU utilization, these constraints could still impact efficiency. Moreover, the wide scope of its AI initiatives, from foundation models to digital humans and robotaxis, raises execution risks and may strain resources in the near term.
The Case for Alphabet Stock
Alphabet, by contrast, is a global behemoth with a far more diversified and resilient business. The company’s revenue base is not only larger but also more diversified than Baidu’s. Besides core search ads, Alphabet owns YouTube, which is a $30+ billion-a-year business on its own, and it operates the world’s third-largest cloud computing platform. It is also a truly global company, generating revenue across all continents, which diversifies its economic exposure (unlike Baidu, which is tethered to China’s economy).
The company has invested in AI research for years (Google AI, DeepMind, etc.), and it’s now moving aggressively to integrate AI across its products. It recently merged Google Brain and DeepMind into a single unit to accelerate innovation.
Alphabet’s financial strength further sets it apart. It ended last quarter with $95.3 billion in cash and marketable securities on its balance sheet, against only about $10.9 billion in long-term debt. Its operations churn out enormous cash flows – roughly $19 billion in free cash flow in the most recent quarter – giving Alphabet the strength to invest in AI, fund strategic acquisitions, and return capital to shareholders (Alphabet has been steadily buying back stock). Such financial firepower is a huge advantage in the AI arms race, where computing infrastructure and top talent are expensive. By contrast, Baidu (while financially solid by most standards) operates on a much smaller scale, with roughly $18 billion in annual revenue (in 2024) and just $3 billion in free cash flow in 2024. Alphabet simply has more resources to deploy.
Alphabet is not without challenges. Alphabet faces mounting cost pressures from its aggressive AI infrastructure investments, with CapEx set at $75 billion for 2025 and depreciation rising 31% year over year in the first quarter of 2025, a trend expected to accelerate throughout the year. Operating expenses rose 9%, driven in part by a 17% spike in G&A costs due to legal and regulatory matters. In Google Cloud, while demand is strong, tight supply constraints are causing variability in revenue growth, tied to the timing of capacity deployment.
In advertising, Alphabet warned of slower growth ahead due to tough comparisons in the Financial Services vertical and new APAC regulatory changes that may reduce ad revenue from regional retailers. Additionally, monetization of AI Overviews and AI Mode remains flat, raising concerns about the profitability of these new experiences. The Gemini app also trails competitors in user engagement, with only 35 million daily active users.
BIDU & GOOGL Stock Performances
BIDU and GOOGL’s share price performances have diverged amid different market conditions. Alphabet’s performance has been steady, whereas Baidu’s has been constrained by China’s economic challenges.
Image Source: Zacks Investment Research
Valuation of BIDU & GOOGL Stocks
Alphabet’s valuation has become very stretched compared to Baidu. Alphabet’s forward 12-month price-to-sales ratio stands at 5.89, above Baidu’s 1.51. While regulatory and competitive headwinds exist, Alphabet’s diversified business and proven adaptability give it resilience. In contrast to Baidu’s situation, Alphabet does not need a macro turnaround or a breakthrough to justify its valuation. It’s already delivering solid growth and profits.
Image Source: Zacks Investment Research
Earnings Estimates Trend & Growth Rate for BIDU and GOOGL Stocks
For BIDU, the Zacks Consensus Estimate for 2025 earnings per share (EPS) has decreased over the past 60 days, while the same for GOOGL has trended upward, as you can see below. The estimated figure for BIDU indicated a 10.5% decline, while for GOOGL, the figure depicts 18.3% growth.
For BIDU Stock
Image Source: Zacks Investment Research
For GOOGL Stock
Image Source: Zacks Investment Research
Which Stock Is the Better Bet Now?
After weighing both cases, Alphabet emerges as the stronger candidate for investors’ cash today. Alphabet’s diversified revenue base, global scale, strong AI integration, and disciplined capital returns outweigh valuation concerns and regulatory risks. Baidu, currently carrying a Zacks Rank #5 (Strong Sell), although deeply undervalued and rich in AI ambition, faces steeper execution and policy hurdles. Alphabet currently carries a Zacks Rank #3 (Hold) and reflects a more reliable footing for investors seeking AI-related gains today. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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