CITIC SEC: The AI glasses sector is still in the thematic investment stage, focusing on the shift from fundamental investment to two types of catalysts.

CITIC SEC has released a research report stating that the AI glasses sector is still in the early stages of thematic investment. If key products from important manufacturers become popular in the future, it is expected to drive the shift from thematic investment to fundamental investment. Based on the release schedule of important manufacturers of AI glasses, the estimated global shipment volume of AI glasses in 2024 is around 3 million pairs, and in 2025 it may be around 10 million pairs. In terms of investment direction for AI glasses, it is recommended that investors focus on key areas such as main control chips (valuable with price flexibility), outsourcing (benefiting from increasing volume), and components supply chain of important customers (benefiting from certainty). The main views of CITIC SEC are as follows: First phase market (August 12th - August 16th): Media reports that Apple is expected to enter the AI glasses market, sparking a 5-day rally. On August 12, according to WeChat public account APPSO citing Bloomberg journalist Mark Gurman's revelations, Apple's Vision team is experimenting with several different wearable VR/AR glasses products, including a more affordable Apple Vision headset, the second generation Apple Vision Pro, and smart glasses similar to Ray Ban Meta. As a result of this news, Doctorglasses Chain (a well-known domestic eyewear retailer) began to climb for 5 consecutive days, with a total increase of 149% in 5 days; Mingyue Optical Lens increased by 35% in 5 days; and leading the gains were the outsourcing companies Minami Acoustics, Emdoor Information, and Cosonic Intelligent Technologies, with cumulative increases of 26%, 21%, and 19% respectively over 5 days. Other related stocks showed relatively tepid performance. The divergence in the growth of AI glasses sector stocks is related to market trends on one hand, and the fact that there is a single layout manufacturer for AI glasses (only META has products), making market skepticism towards the trend of AI glasses more important. Second phase market (November 5th to present): Apple officially launches the AI glasses project, with multiple manufacturers entering the market and releasing AI glasses intensively, leading to a resonating market for the sector. On November 5, according to the WeChat public account MicroDisplay citing Bloomberg news, Apple internally launched the AI glasses project Atlas, conducting internal research on current AI glasses products in the market and collecting feedback from Apple employees on smart glasses. Following this news, Doctorglasses Chain rose by 20% on the same day, and Bestechnic (Shanghai) Co., Ltd. rose by 9%. On November 8, the WeChat public account Titanium Media cited Bloomberg news that Baidu Group plans to release its first Xiaodu glasses with built-in AI assistant at the Baidu World Conference on the 12th, aiming to be the Chinese competitor to Ray-Ban Meta glasses. On November 12, Baidu AI glasses were officially released, and on the same day the WeChat public account Intelligent Emergence reported that Xiaomi's first AI glasses are expected to be launched in April 2025, causing Doctorglasses Chain to rise by 20% again. That evening, the WeChat public account XR Vision Pro reported that Looktech, Rokid, Yingu, Shanji, Leiniao, Janan Technology, etc., are expected to release AI glasses within the year, marking the start of the "Battle of Hundred Glasses". Since then, market confidence in AI glasses has greatly strengthened and attention has significantly increased. Following this, the AI glasses sector mainly followed the market trend of AI applications, with early trading reflecting the US stock market's mapping of AI applications, while Byte's tight layout in AI greatly bolstered market confidence in the domestic AI application prospects. In terms of gains, since November in the eyewear market (as of December 24, 2024), the leading stocks were Doctorglasses Chain (112% increase, the same below) and Shenzhen Bluetrum Technology (110%, with higher attention due to AI headphones), followed by Mingyue Optical Lens (91%), Shenzhen Intellifusion Technologies (89%), SigmaStar Technology (68%), Guoguang Electric (67%), Bestechnic (Shanghai) Co., Ltd. (59%), Minami Acoustics (56%), Actions Technology (50%), Shanghai Fullhan Microelectronics (43%), Puya Semiconductor (Shanghai) Co., Ltd. (43%), Freewon China (38%), Shenzhen KTC Technology (38%), Shenzhen Highpower Technology (35%), etc. It is worth noting that whether it is the first phase of small-cap stocks or the second phase of resonating stocks, matching lenses and lens materials, as well as the outsourcing part, have shown obvious outperformance. In the second phase, market attention is more diversified, focusing on SoC part, brands, and supply chains of big customers. The attention on SoC is mainly due to the significant value elasticity of SoC in the process of AI implementation (price and quantity rising together), and the attention on large factory supply chains is mainly due to the gradual clarification of the product rhythm of each manufacturer, making the supply chain situation well understood by the market. When will the next big market movement in AI glasses occur? - Focus on two types of catalysts. The short-term shipment volume of AI glasses is still low, with an estimated global shipment volume of around 3 million pairs in 2024 and around 10 million pairs in 2025, so the year when the performance of the supply chain may be released is possibly as early as 2026. Therefore, the current performance of the supply chain for AI glasses may be released earliest in 2026.The mirror sector is still in the thematic investment stage. If key products from important manufacturers become popular in the future, it is expected to drive thematic investment towards fundamental investment. Based on this logic, the bank has summarized the catalysts for the two major trends of AI glasses in 2024, and also sorted out important events that may form catalysts in the future.Implicit catalysis perspective (with no specific timeline, mostly incidental news events), reference to the previous two stages of trends, it is necessary to closely follow the movements of major companies. Currently, companies that can have an influential impact on the sector include OpenAI, Apple, Meta, and ByteDance. The progress of these companies in AI glasses and model applications is worth paying attention to. Investment strategy: Glasses are another important intelligent carrier for AI. The development path may present the process of intelligent voice glasses, AI intelligent glasses, and AI+AR/MR glasses. It is recommended to focus on the leading companies in the industry chain, core components, modules, and complete machine linkages. Risk factors: demand lower than expected, technological iterations lower than expected, intensified market competition, etc.