Guosen: Global cloud providers increase investment in AI, satellite internet welcomes large-scale deployment.

Guosen released a research report stating that AI will still be the main investment theme in 2025. Global internet cloud companies are increasing their investment in AI, benefiting both data center networks and applications which are driving the demand for inference. It is important to focus on new technologies, services, and AI components at the edge of data centers. At the same time, China's satellite internet will witness a large-scale launch, and private commercial company Addsino Co., Ltd. is promising. Telecom operators are operating steadily with dividend asset characteristics, with a focus on satellite launches and dividend assets of operators. Guosen's main points are as follows: - In 2024, the communication (Shanghai Composite Index) outperformed the Shanghai and Shenzhen 300 Index by 14.14%. - In 2024, the communication (Shanghai Composite Index) rose by 28.82%, while Shanghai and Shenzhen 300 Index rose by 14.68%. The sector performed better than the overall market, with a relative return of 14.14%, ranking third in the Shanghai level industry. In various subfields, data center IDC, optical device modules, and telecom operators performed well. In terms of valuation, by the end of 2024, the communication (Shanghai Composite Index) valuation PE slightly rose to 25.1X, lower than the historical 30th percentile over the past ten years. Cloud companies worldwide are increasing their investment in AI, benefiting both data center networks Global internet cloud companies have engaged in an arms race, investing in building data centers and developing their own AI chips. The quarterly capital expenditures of the four major internet cloud companies in North America and China's BAT have shown a significant sequential increase. ByteDance has become a new competitor in AI applications. As large-scale applications of inferences and continuous upgrades in computing power and bandwidth take place, cost reduction and energy efficiency become crucial. Technologies such as copper cable connections in server cabinets, higher-speed optical modules, switches, integrated optoelectronic CPO / optoelectric interconnect OIO, silicon photonics, liquid cooling, and data center interconnect DCI are becoming new trends. Broadcom in North America and Huawei in China have become new core suppliers of computing power. In addition, with the large-scale construction of new data centers (intelligent computing centers), traditional supporting services are expected to reach a turning point. Additionally, various applications are flourishing at the edge, where edge AI is expected to drive a new wave of prosperity for the Internet of Things (AIOT) and AI mobile phones. China's satellite internet will witness a large-scale launch In the second half of 2024, the "State Grid GW Constellation" and the "Thousand Sails Plan G60 Constellation" each launched batches of 10 and 54 satellites, respectively. The "Thousand Sails Plan G60 Constellation" plans to launch 648 satellites by the end of 2025 and provide services, with its operator Shanghai Yaoshin Satellite signing a cooperation agreement with a Brazilian telecom company in November 2024. Huawei's MateX6, released in November 2024, can directly connect to satellites. Private commercial company Addsino Co., Ltd. is promising. Telecom operators are operating steadily with dividend asset characteristics According to data from the Ministry of Industry and Information Technology, in the first 11 months of 2024, China's telecommunications service revenue increased by 2.6% year-on-year, while revenue from emerging businesses increased by 7.9%. Telecom operators continue to make precise capital investments, planning to steadily increase dividend payout ratios, with high dividend value still present. Investment advice for 2025: Continue to focus on the AI industry, allocate assets in dividend assets of telecom operators, and pay attention to satellite development (1) For AI data centers, servers, and switches, pay attention to companies such as ZTE Corporation (00763,000063.SZ), Unisplendour Corporation (000938.SZ), Ruijie Networks (301165.SZ), etc. For optical modules and devices, look at companies like Zhongji Innolight (300308.SZ), Eoptolink Technology Inc., (300502.SZ), Suzhou TFC Optical Communication (300394.SZ), Accelink Technologies (002281.SZ), T&S Communications (300570.SZ), etc. For liquid cooling, focus on Shenzhen Envicool Technology (002837.SZ), and for data center services, look at Range Intelligent Computing Technology Group (300442.SZ), etc. For edge AI, focus on companies like Quectel Wireless Solutions (603236.SH), Fibocom Wireless Inc. (300638.SZ), etc. (2) Pay attention to satellite internet companies like Guangzhou Haige Communications Group Incorporated (002465.SZ), Guobo Electronics (688375.SZ), and related companies in the industry chain. (3) Focus on telecom operators like China Mobile Limited (00941,600941.SH), China Telecom Corporation (00782,601728.SH), China United Network Communications (00762,600050.SH). Risk warning: Development bottlenecks in AI technology, lower-than-expected AI investment, changes in external environment such as trade frictions.