Goldman Sachs has released an updated research report detailing its preferences for China's internet and artificial intelligence sub-sectors through the end of the year. The firm has elevated gaming and entertainment to its top pick for defensive growth, followed by cloud and data centers, as well as vertical/education segments, given that weak macroeconomic trends continue to weigh on e-commerce.

The investment bank maintains "Buy" ratings on Tencent Holdings (00700), NetEase (NTES.US), Alibaba-W (09988), GDS Holdings (VNET.US), New Oriental (EDU.US), KE Holdings (BEKE.US), JD.com (JD.US), and MiniMax-W (00100). These companies are expected to benefit from resilient AI cloud momentum, cost efficiencies, and attractive valuations.

In the report, Goldman Sachs notes that factoring in elevated AI investment and recent equity financing activities, it has lowered its 12-month price target for Tencent to HK$650 and reduced earnings per share estimates for the second half of 2026 by up to 5%. Meanwhile, the firm has cut its 12-month target for Alibaba to HK$172, with the US-listed price target for Alibaba (BABA.US) lowered to US$177, reflecting dilution effects. However, based on robust computing power demand, the bank has raised its cloud growth estimate for the September quarter to 53%.