China Securities Co., Ltd.: Reviewing previous growth bulls, how will this round of AI market trend unfold?

China Securities Co., Ltd. Securities released a research report stating that the low-cost, open-source characteristics, and powerful reasoning ability of DeepSeek are expected to greatly promote the development of domestic AI applications and edge AI acceleration. In terms of the industry chain, sectors such as computer/media (AI applications), Siasun Robot& Automation/electronics/intelligent driving (edge AI), and domestic computing power chain are expected to significantly benefit. How to grasp the deduction rhythm? Before the fundamentals are verified, short-term key tracking indicators may be DeepSeek's traffic; in the medium term, if there is an outbreak in edge AI or the flow of new product applications, or if corporate profit margins improve (the earliest focus on the first quarter's report), and the domestic AI investment significantly increases, then the market deduction can refer to smartphones, electric vehicles, transitioning from overseas to domestic industrial prosperity change. The main points of China Securities Co., Ltd. Securities are as follows: The breakthrough progress of DeepSeek can be compared to the American Chat GPT era. Its low cost, open-source characteristics, and powerful reasoning ability are expected to greatly promote the development of domestic AI applications and edge AI acceleration. DeepSeek has confirmed that the overseas blockade of computing power to China is not insurmountable, but can be partially remedied through efficient training methods; in addition, its cost-effectiveness can rebalance the cost-effectiveness between corporate AI investment and output. As of now, multiple cloud service providers and entities in various industries have connected or integrated DeepSeek; at the same time, its powerful reasoning ability is expected to accelerate the development of vertical model applications, accelerating the outbreak of AI applications and edge AI. In terms of the industry chain, sectors such as computer/media (AI applications), Siasun Robot& Automation/electronics/intelligent driving (edge AI), and domestic computing power chain are expected to significantly benefit. Since the beginning of the year, driven by DeepSeek, the TMT market performance has been eye-catching. From a strategic perspective, how to grasp the follow-up deduction rhythm? Based on the history of smartphones, new energy vehicles, and the experience of the domestic and foreign AI markets in recent years, the following references are provided: 1) Before the fundamentals are verified, refer to the overseas mapping market of AI in 23H1 and the popular application market driven by Kimi, Dou Bao, etc. Short-term key tracking indicators may be the traffic of DeepSeek. The visit data of Chat GPT in 23 years shows a significant positive correlation with the domestic technology market. As the growth of Chat GPT visits enters a bottleneck in May, combined with the lack of performance verification in the domestic technology sector as the financial report season approaches, the computer and media sectors have successively peaked and pulled back. Similarly, in February of 24, the rapid growth of traffic for the popular application Kimi was the main driver of the outbreak in the media sector at that time. Trading indicators such as the TMT index's turnover ratio reaching the overheating zone may increase market volatility, but cannot determine the market height. 2) In the medium term, if the traffic of DeepSeek successfully spreads to related edges and applications, bringing about an outbreak in new product flows, or if corporate profit margins improve (the earliest focus on the first quarter's report), and domestic AI investment significantly increases, then the market deduction can refer to smartphones, electric vehicles, transitioning from overseas to domestic industrial prosperity change. Looking back at the smartphone and new energy vehicle markets, the first stage was the overseas mapping and theme hype after the landing of overseas hot products; but both formed a second wave of investment boom in the domestic market and maintained a longer duration. On one hand, the acceleration of domestication of overseas leading supply chains promoted this, but more importantly, after the landing of overseas business models, the appearance of domestic popular products, accelerated penetration rates, and the substantial increase in industry chain capital expenditure. At this time, the sector's performance realization strength has increased, and larger stocks are more likely to move out of an independent market from the bottom up. The previous domestic AI investment cycle lagged behind overseas, the performance realization of the industry chain was weak, and the market was mainly thematic; but with the successive breakthroughs of DeepSeek and Dou Bao, domestic AI investment is increasing, and the rise of the local AI industry chain is underway. Risk warning: Domestic demand support policies are lower than expected; market selling pressure exceeds expectations; geopolitical risks; US market volatility exceeds expectations.