Divergence in the performance of Chinese internet majors will continue next year, as they react differently to challenges such as weak consumer spending and intense competition, Fitch Ratings said in a Thursday release.

Still, the companies possess strong business profiles and financial positions, with the rising use of artificial intelligence also providing growth opportunities, Fitch said.

The rating agency's negative outlook on the Chinese sovereign limits the outlook on major companies such as Alibaba Group Holding (HKG:9988) and Tencent Holdings (HKG:0700), given their large domestic operations and the level of government regulation and oversight for the sector.

Fitch expects the companies' net cash positions to remain stable, but debt levels will remain elevated given ongoing share buybacks and potential foreign exchange risks.

Meanwhile, smaller internet companies will focus on cost optimization and cash preservation given profitability risks in the near term, Fitch said.