What happened
Shares of several Chinese stocks surged this week on chatGPT excitement and a big deal in the fast food space that will bring Popeyes restaurants to China.
For the week, shares of the question-and-answer online content platform Zhihu (ZH 1.54%) traded more than 34% higher as of 2:26 p.m. ET Thursday. Meanwhile, shares of TH International (THCH 1.79%), or Tims China, traded a whopping 47% higher, while shares of Meihua International Medical Technologies (MHUA 2.77%) were also up about 31.6%.
So what
Excitement is building over ChatGPT, which is a chatbot developed by OpenAI that can essentially answer questions like a customer service rep. The bot is powered by artificial intelligence (AI) and has really impressed people with its accuracy in answering questions, finding information, and performing other tasks. The technology has the potential to be applied to a range of different industries.
Image source: Getty Images.
In a research note put out earlier today, Morgan Stanley analysts said investors should take the hype seriously. They noted that ChatGPT is "the fastest platform to a million users and fastest to 100 million site views. Hence, when we consider tech diffusion with real market impact potential (one of our key secular themes for 2023) generative AI is a serious contender."
Naturally, any stock that is exploring the technology or even involved in AI and could explore the technology is getting bought up by investors. Two of these are Zhihu and Meihua International Medical Tech. I haven't seen any specific news saying that Zhihu is getting into ChatGPT but the company would be an ideal candidate. Zhihu is China's version of Quora, where people simply ask questions for others to answer and provide their perspectives. ChatGPT would certainly have plenty of applicability for a company like this.
There was more specific news around the Chinese medical device manufacturer Meihua International, which announced that it is planning to explore ways to use ChatGPT to create and launch online health consulting. Meihua International's CEO Xin Wang said ChatGPT could be used "to create virtual assistants to provide personalized recommendations and advice to patients based on their medical history, current symptoms, and other relevant factors."
Despite the exuberance around ChatGPT, there was likely no Chinese stock that has risen more this week than TH International, which is the company that runs Tim Hortons restaurants in China. Yesterday, the company's board of directors approved a plan for the company to purchase the exclusive rights to build and operate Popeyes restaurants in China and Macao. Popeyes is owned by Restaurant Brands International.
"Tims has been a huge success in China -- with more than 600 locations on our way to 1,000 by year-end," TH International's board chair Peter Yu said in a statement. "We are building on that success and launching a second leading brand in the world's most compelling consumer market."
Now what
I definitely think the hype around ChatGPT is real, but I still think it's early in the technology's development. This kind of erratic buying reminds me of the days when investors were buying meme stocks or anything that had to do with non-fungible tokens.
I think the technology needs some time to play out, so be careful when buying stocks that just rallied 30% to 40% because they can be volatile.
I do, however, like that Tims China is expanding its brands with Popeyes. It's a well-known brand that many Chinese citizens are likely very familiar with and seems like a no-brainer, especially given China's massive and vibrant consumer market.