I recently read an interesting book about artificial intelligence titled AI Superpowers: China, Silicon Valley, and the New World Order. Author Kai-Fu Lee argues in the book, which was first published in 2018, "If data is the new oil, then China is the new Saudi Arabia."

Lee knows a lot about artificial intelligence and China. He was born in Taiwan and now lives in Beijing. He has worked in AI for decades. Lee helped establish Microsoft's (MSFT 0.46%) research lab based in China. He then led Google China, which now is a subsidiary of Alphabet (GOOG 1.43%) (GOOGL 1.42%), for several years before launching a venture capital firm focused on Chinese technology companies.

In AI Superpowers, Lee maintains that Chinese companies could hold key advantages in AI development. If he's right, here are three AI stocks that could trounce Alphabet and Microsoft.

1. Alibaba Group

Alibaba Group (BABA 2.33%) is sometimes referred to as the "Amazon of China." There definitely are several similarities between the two companies. Both are e-commerce leaders. Both have major cloud services units.

Like Amazon, Alibaba has incorporated AI throughout its e-commerce ecosystem. Each company has rolled out AI-powered personal assistants and smart speakers. As is the case for Amazon, Alibaba's biggest AI opportunity is with its cloud hosting operations.

The Chinese company believes that it's "in a unique position to develop large-scale commercial use of AI." This view is based in large part on Alibaba's deep access to consumer experiences on its e-commerce and digital media platforms and to applications that clients run on its cloud-hosting platform.

Alibaba recently announced plans to roll out a rival to OpenAI's ChatGPT. CEO Daniel Zhang said that generative AI and cloud computing has led to "a technological watershed moment."

The company is breaking up into six separate businesses. AI-focused investors will probably want to especially pay attention to Alibaba's cloud intelligence group, which will include cloud and AI operations. 

2. Baidu

Baidu (BIDU 2.30%) is sometimes called "China's Google." It developed a highly popular search engine. Also like Google, the company has invested heavily in AI.

There aren't many companies in the world that offer a full infrastructure for supporting AI applications, but Baidu is one of the few. The Chinese company makes AI chips, operates a cloud-hosting platform, and has advanced AI software. 

Baidu introduced its ChatGPT rival, ERNIE Bot, last month. Investors weren't overly impressed with the demo for the new chatbot. However, it's still only early innings for Baidu's generative AI efforts. 

Meanwhile, the stock appears to be dirt cheap compared with most AI leaders. Baidu's shares trade at only 14 times expected earnings. 

3. TenCent Holdings

TenCent Holdings (TCEHY 5.23%) ranks as one of the biggest video game companies in the world. Its games include Call of Duty Mobile and Dune Awakening. But Tencent has expanded beyond video games. 

The company also operates live-streaming services. It developed the WeChat and Weixin instant messaging, social media, and digital payment app. With these and other products, TenCent generates significant revenue from online advertising and fintech. 

TenCent already uses AI in its operations, particularly with its online advertising. It's investing heavily in building AI technologies, including a ChatGPT rival called HunyuanAide.

The Chinese tech company's market cap currently stands at around $450 billion. With AI tailwinds at its back, TenCent could potentially be worth a lot more over the next decade and beyond.

One common risk

There's no guarantee that Alibaba, Baidu, and TenCent stocks will outperform Alphabet and Microsoft going forward. One common -- and significant -- risk for these stocks relates to the Chinese government.

China's regulators are proposing to require companies in the country to get government approval before launching AI technology. This could slow Alibaba, Baidu, and TenCent in rolling out new AI apps. Also, the perceived connections of these companies with the Chinese government could limit their growth potential in markets including the U.S.