JPMorgan's Bullish Call on Asian Tech Stocks: AI-Driven Growth and Targeted Opportunities

The tech sector is undergoing a seismic shift as artificial intelligence (AI) emerges as the catalyst for value creation. JPMorgan's recent research on Asian tech stocks highlights a compelling narrative: selective exposure to AI-empowered firms with strong cash flows and strategic positioning can deliver 15-20% upside in 2025. At the forefront of this opportunity are Salesforce, Inc. (CRM) and Kingsoft Cloud Holdings (KC), which are leveraging AI to drive growth in their respective markets. Here's why investors should pay attention.

Salesforce: AI Integration Fuels a CRM Giant's Next Chapter

Salesforce, a $256 billion leader in customer relationship management (CRM), is undergoing a quiet but transformative shift. Its Q1 2026 results underscore resilience: revenue rose 7.7% year-over-year to $9.8 billion, while free cash flow hit $6.3 billion—a 3.5% increase from the prior year. These metrics are critical, as JPMorgan emphasizes that cash flow generation is the lifeblood of tech firms navigating AI's capital-intensive landscape.

But Salesforce's true edge lies in its AI strategy. The company's Agentforce suite—which uses generative AI to automate customer interactions and seamlessly transition to human support—has positioned it as a pioneer in enterprise AI. This isn't just incremental innovation; it's a redefinition of how businesses manage client relationships.

JPMorgan's take:
- Analyst Mark Murphy rates Salesforce Overweight with a $380 price target, implying a 43% upside from current levels.
- The Street's Moderate Buy consensus averages $348.49, suggesting a 31% return potential.

Motivation: Salesforce's recurring revenue model (94% of sales from subscriptions) and its ability to scale AI tools across industries make it a defensive yet growth-oriented bet. Investors should focus on free cash flow per share (FCF/Sh), which Murphy expects to grow 9-10% in fiscal 2026.

Kingsoft Cloud: Riding China's AI Surge with Strategic Partnerships

While Salesforce dominates Western markets, Kingsoft Cloud is carving out a niche in China's $280 billion cloud market. The Beijing-based firm's Q1 2025 revenue rose 11% year-over-year to ¥1.97 billion (US$271.5 million), despite missing estimates. The bigger story? AI-related gross billing surged 500% in Q4 2024 to ¥474 million, driven by partnerships with Xiaomi and Kingsoft Group.

This growth isn't just about scale. Kingsoft's AI compute services—critical for training large language models—are in high demand. Analyst Alex Yao at JPMorgan notes that 70% of Kingsoft's AI revenue flows from clients like Xiaomi, which rely on its GPU infrastructure to power chatbots and autonomous systems.

JPMorgan's take:
- Rated Overweight, with a $18.50 price target (44% upside from current prices).
- A Strong Buy consensus (5 analysts) averages $17.66, implying 37.5% upside.

Risk and reward: Kingsoft's path to profitability is clear. It achieved its first non-GAAP operating profit (1.1% margin) in Q4 2024 and aims for EBITDA breakeven by Q1 2025. However, investors must monitor margin pressures from third-party compute providers and geopolitical risks.

Why Asian Tech Stocks Deserve a Closer Look

JPMorgan's broader thesis hinges on two pillars:
1. AI's shift from infrastructure to applications: While U.S. tech giants like Microsoft (MSFT) dominate AI hardware, Chinese firms are leading in applied AI (e.g., chatbots, autonomous driving). This bifurcation creates opportunities for firms like Alibaba and Baidu, but Salesforce and Kingsoft stand out for their cash flow discipline and scalable AI models.
2. Valuation gaps closing: Asian tech stocks trade at a 1.7x discount to U.S. peers, despite similar AI adoption rates. Salesforce's P/E of 36x is reasonable given its FCF growth, while Kingsoft's 25% forward revenue CAGR justifies its upside.

Investment Strategy: Targeted Exposure to AI Leaders

For investors, the key is selectivity:
- Buy Salesforce for its recurring revenue and AI-driven margin expansion.
- Accumulate Kingsoft Cloud ahead of its Q1 2025 earnings (May 28) and AI revenue guidance.
- Avoid overpaying: While JPMorgan's price targets are aggressive, consider dollar-cost averaging or using options (e.g., worst-of calls) to limit downside risk.

Risks to the Thesis

• Geopolitical headwinds: U.S.-China trade tensions could disrupt semiconductor supplies, impacting cloud providers like Kingsoft.
• Margin pressures: Kingsoft's reliance on third-party compute partners may limit profitability.
• AI hype vs. reality: Overvaluation of AI stocks could lead to corrections if monetization lags.

Conclusion: AI's Winners Are Already in the Market

JPMorgan's analysis makes a compelling case for Salesforce and Kingsoft Cloud as cash-flow positive, AI-empowered leaders. While broader tech markets face macroeconomic uncertainty, these stocks offer sector-specific upside through their strategic positioning and financial strength. Investors seeking to capitalize on AI's next phase should consider these names as core holdings.

As always, do your homework: Monitor Salesforce's FCF growth and Kingsoft's margin improvements. In a world where AI is no longer a “maybe,” these firms are proving it's a “now.”

Disclosure: This analysis is for informational purposes only and not a recommendation to buy or sell securities.