CITIC SEC: It is expected that the attractiveness of China's leading technology assets will gradually become apparent, focusing on domestic large-scale models and computing power processes.

CITIC SEC released a research report stating that since the launch of ChatGPT, American AI assets have gained unprecedented attention from global investors. The bank believes that after 2025, the attractiveness of Chinese AI assets will gradually become evident. Top AI companies continue to invest heavily, iterate quickly, and take risks, with the potential to achieve stable revenue and profitability growth, as well as performance-driven alpha investment opportunities. Top AI companies have a clear comparative advantage in valuation relative to comparable American companies, and once there is dual pressure on performance and valuation in US tech stocks due to slowing CAPEX growth, the attractiveness of Chinese assets will become more apparent. The bank focuses on investment opportunities in large domestic models, domestic computing power processes, intelligent driving, and embodied intelligence companies. The main points of CITIC SEC are as follows: Market review and outlook: In 2024, US tech stocks led global gains, and the bank expects the attractiveness of top Chinese tech assets to gradually become evident after 2025. The Nasdaq rose by 34% in 2024, with a cumulative increase of nearly 100% from the end of 2022 to the end of 2024. NVIDIA Corporation led the way among US tech giants, rising by 171% in 2024, contributing to approximately 19% of the Nasdaq's increase during the same period, and has risen by 831% since 2023. US tech stocks have seen both profit and valuation increases, attracting unprecedented attention from global investors. In 2024, the Shanghai Composite Index rose by 14%, with A-share electronics/communications/computing/media/automotive indices rising by 17%/28%/17%/19%/19% respectively, and the Hang Seng Technology Index rose by 17%, outperforming the indices. The bank believes that in the next 3-6 months, advancements in AI technology and applications may continue to drive US tech stocks higher until the slowdown in CAPEX growth of tech giants. Once US giants experience a slowdown in profit growth and pressure on valuation, the relative attractiveness of Chinese AI assets will become more apparent. By 2025, the continued investment of top AI companies is expected to gradually reflect in their performance, with valuations having a clear comparative advantage over comparable US companies, and the valuation advantage of top Hong Kong tech companies being more significant. Domestic AI models: AI model companies are expected to see continued high growth in performance, with models driving B-end demand as infrastructure and applications driving C-end demand. ByteDance's Douyin model capabilities continue to improve, occupying a leading position in the top tier in the 2024 SuperCLUE general large model benchmark list. According to aicpb website, Douyin APP has reached 71.16 million monthly active users, ranking first domestically. At the 2024 Volcano Engine Winter Force Conference, in December 2024, Douyin's daily average token call volume for large models had reached 40 trillion times, a 33-fold increase from May. The bank believes that Douyin's usage and penetration rates are still in a high-speed growth phase, and daily average token call volume will continue to see high growth. In terms of business models, as models serve as infrastructure, Douyin's model capabilities are improving while significantly lowering prices, with B-end customers such as mobile phones, cars, and smart terminals continuing to increase their use of Douyin; as applications, C-end customers' monthly active users and daily average token usage both have significant room for improvement. The bank points out two types of related investment opportunities: 1) ByteDance's computing power chain IDC company, 2) top internet companies with similar products. Domestic computing power processes: The core competition for AI computing power lies in the capabilities of advanced process chips, with wafer fabs expected to continue to strengthen their position as core strategic assets. External sanctions have significantly enhanced the scarcity of "available advanced processes," shifting supply-demand relationships from globally balanced to limited domestic solutions. The US has tightened restrictions on AI and semiconductor exports to China, with the Biden administration officially announcing new global control measures on AI chip exports on January 13, implementing strict controls on the purchase of advanced AI chips from mainland China. Chinese model companies, while purchasing NVIDIA Corporation chips, also need to strategically consider the supply of domestic AI chips. For domestic AI chip companies, the availability of "international advanced processes" has decreased, while the scarcity of "available advanced processes" has increased. The domestic demand for advanced processes will continue to drive demand in areas such as mobile phones, computing power, CPUs, and intelligent driving. Semiconductor Manufacturing International Corporation (688981.SH), as a leading domestic wafer foundry with advanced process capabilities, is expected to see an increase in demand, profitability, and valuation. Intelligent driving and embodied intelligence: Automotive intelligent driving is the first application scenario where AI is being implemented, and is expected to be generalized into embodied intelligence and low-altitude economy. VLM+ end-to-end technology is driving the transition of automotive intelligent driving from being "usable" to "user-friendly," and from "functional" to "experiential." L2+ intelligent driving integrating high-speed NOA and urban NOA is gradually entering a period of widespread adoption, with the bank estimating penetration rates of L2+ intelligent driving in 2024 and 2025 to be 14% and 30% respectively, mainly driven by BYD Company Limited (002594.SZ), Xiaomi, Huawei, and other automakers driving the intelligentization of millions of cars. The vision, language, and action-fused VLA model is seen as a key technology for the next generation of intelligent driving, which is also applicable to Siasun Robot & Automation. Tesla, Inc. (TSLA.US) is leading car companies to enter the field of embodied intelligence, with companies like Xiaomi, XPeng, Inc. ADR Sponsored Class A (09868), BYD Company Limited, and others following suit; Fourier, Galaxy General, Xingdong Era, and Intelligent Siasun Robot & Automation were present at the CES 2025 NVIDIA Corporation conference. Additionally, car companies are actively participating in the low-altitude economy, such as XPeng Huitian and Geely's Wo Fei. Risk factors: - Risks related to political and trade tensions intensifying, causing product exports to be blocked or reduced competitiveness. - Risks associated with lower-than-expected macroeconomic growth. - Risks related to AI technology.The risk of progress and application not meeting expected implementation speed.Moonlight fell through the trees, casting a soft glow on the ground.