Sinolink: AI main line configuration is just right. Analysis of AI prosperity grading investment framework.

Sinolink released a research report stating that, currently, domestic demand is improving marginally under policy and interest rate adjustments, and exports are supported by multiple factors. However, market liquidity has become a key variable accelerating the "spring frenzy" while expectations for reserve requirement ratio cuts are strong. At the same time, the rapid development of AI technology industry has led to the construction of a hierarchical investment spectrum based on core product penetration rates, revealing industry directions with high prosperity and profit elasticity for investors. In this context, the "spring frenzy" has not yet ended, and opportunities for small and medium-sized technology growth stocks have become more prominent, focusing on TMT+ mechanical sectors. Whether it is short-term thematic investing or medium to long-term prosperity investing, now is a golden opportunity for AI allocation. Sinolink's main points are as follows: Continuing to favor the "spring frenzy" in February, AI theme allocation is timely The bank maintains its previous views on the domestic economy: (1) In terms of domestic demand, the "replacement of old with new" combined with the reduction in interest rates for existing loans for residents has to some extent offset the drag on consumer demand from the real estate sector, providing marginal support for consumption. (2) The "grab for exports" effect supports export growth, and the resilience of demand in emerging markets also supports China's export growth. Although M1, which the bank has been paying high attention to, has risen for three consecutive months, for the "spring frenzy" to accelerate, market liquidity urgently needs to be "efficient and surplus", so expectations for reserve requirement ratio cuts are high. Regarding the end of the "spring frenzy", the bank emphasizes continued attention to the "slackening" of domestic fundamentals and the re-emergence of overseas risks. On one hand, the bank needs to continue to observe the sustainability of the current round of domestic fundamental improvement, expecting to focus on key indicators such as PMI production, orders, and M1 in March 2025 to see if there may be a weakening, indicating a possible "slackening" of domestic fundamentals. On the other hand, attention should be paid if the US unemployment rate rises significantly to 4.4%, indicating the emergence of overseas risks. Building an AI hierarchical investment spectrum: Prefer direction with high prosperity and profit elasticity In summarizing the rules of the past fifteen years of the technological industry revolution, the bank uses the penetration rate of core products as an "anchor" and divides it into: 1. Theme investment: core observation indicators are product penetration rates in the range of 0-10%, resulting from valuation expansion, based on characteristics such as high volatility and fast rotation, a "diversified strategy" layout is recommended; 2. Prosperity investment: core observation indicators are product penetration rates breaking through 10%, driven mainly by profits, where (1) with a penetration rate of 10%-15%, attention should be paid to core indicators: capital expenditure; (2) with a penetration rate of over 15%, attention should be paid to ROE levels and their stability. Development of AI technology industry and associated framework: (1) Large AI models will drive the demand and continuous iteration of "hardware infrastructure" such as AI chips, servers, and storage; (2) Breakthroughs in technologies such as Deepseek large models will accelerate the development and implementation of AIAgent and terminal carriers, including: Intelligent portable and wearable electronic devices; Intelligent transportation and manufacturing; Smart home living and other areas; (3) The rapid penetration rate of AI terminal carriers will also give rise to greater demand for AI basic components and parts; (4) The application of AI software and terminal carriers are mutually causal and promote each other, ultimately leading to a "two-way" iteration. Outlook for the 2025 AI prosperity hierarchical investment spectrum: (1) Preferred sectors with rising "quantity, value, and ROE" and Capex expansion in AI high prosperity and high profit elasticity industries, including: optical modules (CPO), new display technologies, optical chips, and related industries/indices; (2) Secondary sectors with strong demand but supply has not expanded, indicating a recovery in prosperity with the confirmation of profit elasticity pending Capex expansion, including: HBM, AI smartphones, smartwatches, and related industries/indices; (3) Sectors to watch with rising demand at the bottom and improvements in indicators such as "quantity or price", which are expected to see a comprehensive rise in prosperity in the future, including: intelligent driving, unmanned driving, servers, liquid-cooled servers, AIPC, smart speakers, high-speed copper connections, and related industries/indices. Style and sector allocations: The "spring frenzy" has not ended, and AI allocation is timely (1) Based on the AI prosperity investment spectrum, long-term focus is on: optical chips, optical modules and new display technologies. (2) AI thematic investing is timely, short-term focus on: Deepseek large models and related infrastructure and components; low-altitude economy + unmanned driving; Peek materials; AI consumer electronics, including glasses, smartphones, speakers, etc.; AI software applications, in education, healthcare, finance. Risk warning: Acceleration of the confirmation of a "hard landing" of the US economy beyond market expectations; domestic export slowdown exceeds expectations.