Bernstein is looking at Chinese internet tech stocks like it’s the downtrodden days of Covid-19. “For all the justified consternation around geopolitics and trade headwinds, we think the mantra of ‘fade sentiment extremes’ still applies,” Bernstein China internet analyst Robin Zhu and a team said in an April 14 report. “Several of the other conditions that marked prior bottoms in the China internet sector now apply again,” they said, pointing out that valuation multiples have mostly fallen back to the lows seen in the 2021 to 2023 period. Tighter government regulation on Chinese internet businesses and the Shanghai lockdown in 2022 had weighed heavily on investor sentiment. But as Beijing ramped up its stimulus announcements in recent months and signaled more private sector support — especially with the advent of DeepSeek’s artificial intelligence breakthrough — Hong Kong’s Hang Seng Index broke a four-year losing streak in 2024 and kicked off 2025 with a strong start. “Looking across global markets, we can’t help but feel the rate of regulatory change Stateside feels mildly reminiscent of China in 2021,” the Bernstein analysts said, noting China’s current policy stance now appears more predictable in contrast. “Within our [China internet] coverage, video gaming feels like the sector most insulated from trade and macro headwinds, while digital ads might even be benefitting from merchants pivoting to selling domestically,” the Bernstein report said, highlighting two sweet spots for social media and gaming giant Tencent . U.S.-China trade tensions escalated into an essential standoff over the last two weeks, while uncertainty has grown over whether major Chinese companies will need to delist from U.S. exchanges. The Hang Seng curtailed its earlier 2025 gains and is up nearly 7% this year as of Thursday’s close. The market was closed Friday for a holiday. Tencent, the largest Hong Kong-listed company by market cap, remains Bernstein’s top pick in the China Internet sector. The tech company trades at 13.5 times estimated 2026 earnings, which the analysts pointed out is not far from the bottom of a recent range, before investors started buying the stock on expectations it can benefit from generative AI. The firm rates Tencent overweight with a 640 Hong Kong dollar price target — for expected upside of nearly 40% from Thursday’s close. Bernstein also rates Chinese gaming company NetEase overweight, with a $125 price target, or nearly 27% upside from Thursday’s close. The stock is listed in both the U.S. and Hong Kong. China approved 362 new games in the first quarter, almost recovering to 2020 levels, Bernstein analysis showed. Beijing had temporarily halted new game approvals in the interim while trying to restrict minors from playing games for too many hours each week. Major Chinese companies’ digital ads revenue has been growing by at least 10% year on year in recent quarters, the Bernstein analysts said. For Tencent in particular, they expect the company can benefit from Chinese merchants needing to compete more in the domestic market due to high U.S. tariffs. “Our channel checks with advertisers have pointed to improvements in AI and ad tech driving clear upside in ad [return on investment] across Tencent’s properties,” the Bernstein analysts said, pointing to the Chinese company’s Miaosi ad creation platform and increased ads on short videos hosted within Tencent’s ubiquitous WeChat social media and messaging app. Part of the Chinese government’s efforts to support local exporters is to assist them with selling products once destined for the U.S. to Chinese market instead. China reported first-quarter gross domestic product growth last week of 5.4% , above expectations. Economists meanwhile have started cutting targets — with UBS down to a forecast of just 3.4% for the year, versus China’s official target of around 5%. “While pressure from US-China trade issues poses clear risks for the Chinese economy, the 100-200bps of top-down slowdown most analysis we’ve read do not point to some kind of economic apocalypse,” the Bernstein analysts said. “On the local services front, Meituan’s forward guidance remained robust, pointing to mid-20% [gross transaction value] growth (higher than Q4 levels), and slightly lower growth in revenues,” the Bernstein analysts said of the food-delivery giant, which is listed in Hong Kong. The firm rates the stock overweight and has a price target of 200 HKD, or 46.5% upside from Thursday’s close. Bernstein also has overweight ratings on Alibaba and JD.com , which have shares listed in both the U.S. and Hong Kong. Their only China internet stock pick that doesn’t have a Hong Kong listing yet is Temu’s parent PDD. Chinese companies listed in the U.S. have started offering shares in Hong Kong in the last several years as worries increased about a potential forced delisting from New York exchanges. The concerns picked up again after the White House in late February said it would review U.S. investments in Chinese companies. And when asked by Fox Business on April 9 about a potential delisting, U.S. Treasury Scott Bessent said, ” Everything’s on the table .” The Bernstein analysts pointed out that investors have recently preferred Hong Kong stocks that are also accessible from mainland China via the “Southbound” stock connect, and avoided U.S.-listed Chinese companies that may find it difficult to list in Hong Kong. They expect PDD may already be seeking a deal of some kind to mitigate the business impact of any increased U.S. restrictions. — CNBC’s Michael Bloom contributed to this report.