Southwest: AI investment increased, satellite industrialization advanced

Southwest released a research report stating that by 2024, China's two major satellite constellations will have completed the launch of the first batch of networking satellites, the G60 Qianfan constellation has launched commercial IoT services, and Huawei's Mate series low-orbit satellite internet system will begin testing by the second half of 2025. It is expected that by 2025, both the Star Network and Qianfan constellation will have completed the launch of over 100 satellites, initiating global networking and opening up small-scale basic communication services. The satellite communication business model is expected to be established, and operating and service providers are likely to see an increase in valuation. In 2025, the AI wave and satellite communication may become important investment themes, and it is recommended to focus on key sectors such as satellite/optical & copper communication/operators & equipment vendors/industrial Internet. Southwest's main points are as follows: AI investment is increasing, strong demand for technological iteration Domestic and foreign cloud vendors are increasing their investments in AI, with Google, Microsoft, ByteDance, and other foreign and domestic cloud vendors expected to continue increasing their investments in the AI field by 2025, driving high demand across the entire AI industry chain. According to IDC, the global total computing power is expected to reach 3300Eflops by 2025, with a CAGR of 50.4% from 2021 to 2025. The global computing power supply is still in short supply, and communication bandwidth and technological upgrades in fields such as optical/copper connections, switching equipment, etc. are accelerating. It is expected that the demand for 1.6T optical modules, CPO, copper connections, etc. will accelerate by 2025. Meanwhile, domestic communication equipment manufacturers who have been deeply cultivating in the international industry chain are expected to benefit from the incremental demand and technological innovation brought about by this wave of AI, and it is suggested to focus on overseas computing power support and domestic cloud vendor support enterprises. Satellite Internet enters its industrialization year, focusing on core enterprise orders and profit release By 2024, China's two major satellite constellations will have completed the launch of the first batch of networking satellites, the G60 Qianfan constellation has launched commercial IoT services, and Huawei's Mate series low-orbit satellite internet system will begin testing by the second half of 2025. It is expected that by 2025, both the Star Network and Qianfan constellation will have completed the launch of over 100 satellites, initiating global networking and opening up small-scale basic communication services. The satellite communication business model is expected to be established, and operating and service providers are likely to see an increase in valuation. At the same time, satellite component models are gradually being finalized, and the profitability of midstream suppliers will improve, and it is recommended to monitor changes in core suppliers of satellite and ground station components. Optical communication transmission/operators & equipment vendors/industrial Internet track remains active In 2024, the communication industry remained active under the drive of AI, with sectors such as optical, copper, and satellite internet rotating actively. By the end of the first three quarters of 2024, the total revenue of the communication sector reached 1.9 trillion, a year-on-year increase of 3.7%; achieving a net profit of 177.66 billion, a year-on-year increase of 8.2%, and continued improvement in profitability. In 2025, the AI wave and satellite communication may become important investment themes, and it is recommended to focus on key sectors such as satellite/optical & copper communication/operators & equipment vendors/industrial Internet. Key stocks to watch: Zhongji Innolight (300308.SZ), Genew Technologies (688418.SH), Beijing InHand Networks Technology (688080.SH), Beijing Jiaxun Feihong Electrical (300213.SZ), etc. Risk warnings: escalating geopolitical influences; rising raw material prices; exchange rate fluctuations; significant changes in sector policies; AI progress falling short of expectations, etc.