Tencent and Alibaba face intense competition in China's AI sector, with Bernstein analysts highlighting divergent paths to dominance. Tencent delivers solid returns through ads and gaming, while Alibaba's AI potential hinges on the Qwen3-Max-Thinking launch, though investor scrutiny persists over tangible e-commerce gains. Red packet handouts are seen as a blunt tool to boost chatbot usage, but analysts warn investors seek clearer evidence of AI's impact on gross merchandise value and marketing revenue. Regulatory risks also loom, with investigations potentially dampening sentiment despite recent market pullbacks.