CMSC: At which stage is AI+ market interpretation now?

CMSC released a research report stating that starting in the second half of 2024, as the penetration rates of Beanbag and Deep Seek approach 5%, the artificial intelligence sector will see a major upswing in excess returns. Compared to the previous three rounds of market trends, the current excess return of the artificial intelligence (CSI) sector relative to the WIND index is 1.36 times, with a duration of about five months, similar to the mobile Internet in May 2013, food and beverage in August 2016, and electric vehicles in December 2020. There is still significant room for the duration and magnitude of future excess returns. In terms of risk points, starting in late March, it is necessary to pay attention to the possibility of a decline in excess returns in the artificial intelligence sector due to performance disclosure reasons. CMSC's main points are as follows: Where is the AI+ market trend heading in 2015? In the basic principles of race investment, 5-10% is a key watershed for distinguishing between thematic concept investment and race/industry trend investment. When the 5-10% penetration rate is broken, excess returns will see a major upswing. In the most typical years of the past decade, such as 2013's mobile Internet, 2016's food and beverage, and 2020's electric vehicle trends, when the penetration rate breaks through the key threshold of 5-10%, the race sees a major upswing. Last quarter, the penetration rate of AI+ applications exceeded 5%, and as the penetration rate is rapidly increasing, the race has entered an upswing in excess returns. Currently, the excess return of the artificial intelligence (CSI) sector relative to the WIND index is 1.36 times, lasting from September last year to February this year. Compared to the previous three rounds of market trends, it is currently in a similar position to May 2013's mobile Internet, August 2016's food and beverage, and December 2020's electric vehicles. Looking at the risk points, for companies that have risen in AI+, a large portion will not show high growth in performance in their annual reports and first-quarter reports. Therefore, stocks in AI+ lacking performance support in April have a certain risk. Looking back over the past two years, the phase excess returns of the AI sector have all experienced a significant decline with the arrival of the financial reporting season. Starting in late March, it is necessary to focus on the possibility of a decline in excess returns in the artificial intelligence sector. The main reasons for the overall good performance of the A-share market this week are: (1) domestic Internet giants comprehensively pushing AI, such as Tencent WeChat integrating DS large models, and Alibaba's capital expenditures greatly surpassing market expectations; (2) Market volume along with the Index's marginal warming growth, and the market's main line is relatively clear (AI+); (3) Geopolitical tensions have temporarily eased, with a relatively stable external environment; (4) Hong Kong core technology continues to "re-evaluate" its assets, driving A-share technology to strengthen. Post-holiday construction progress is lower than the same period last year, while second-hand housing transactions are relatively active. This week's mid-range indicators show that areas of improvement include consumer electronics, power equipment, real estate transaction prices and areas, with post-Spring Festival construction progress slower than the same period last year and a narrowing of the year-on-year growth rates in January's car production and sales. Specifically: 1) Smartphone shipments in December saw a year-on-year increase from negative to positive; 2) The cumulative year-on-year growth rate of charging piles in January expanded; the year-on-year growth rate of car production and sales in January narrowed; 3) Post-Spring Festival construction progress is lower than the same period last year, with non-real estate project resumption and labor return rates and funding rates better than housing construction projects. Considering that the funding rate of real estate projects has turned positive year-on-year, subsequent resumption of work progress is expected to accelerate. 4) In January, the sales price index of residential properties in 70 major cities showed a narrower year-on-year decline, while second-hand housing transactions were relatively active; the average daily transaction area of second-hand houses in 13 major cities showed marginal improvement and were at a relatively high level compared to the same period in past years. It is recommended to focus on improving consumer electronics sentiment, accelerating infrastructure construction, and industry opportunities brought about by improved real estate transactions. Significant net inflows in financing, with continuous net redemptions in ETFs. A total net inflow of 26.03 billion yuan in financing during the first four trading days; 4.36 billion shares of new equity-based mutual funds were established, an increase of 3.86 billion shares compared to the previous period; ETFs saw net redemptions, corresponding to a net outflow of 35.78 billion yuan. In terms of industry preferences, financing funds were net buyers of electronics, power equipment, mechanical equipment, etc.; consumer ETFs had more subscriptions, while medical ETFs had more redemptions. The size of important shareholders has expanded, with an increase in planned reduction sizes. Grok 3 officially released. On the 18th at noon Beijing time, Musk live-streamed the release of the latest chat Siasun Robot & Automation Grok3 developed by his xAI company on the X platform. In terms of performance in areas such as mathematical reasoning and scientific logic reasoning, Grok 3 and Grok-3mini both outperform or rival competitors such as Gemini, DeepSeek, and ChatGPT. Overall A-share valuation levels increased this week, with the Wande total A index PE (TTM) at 15.5, up 0.2 from last week, placing it at the 53.0% percentile of historical valuations. Most index valuations decreased this week, with electronics, mechanical equipment, and computer valuations leading the way up, while agriculture, forestry, animal husbandry, fisheries, media, and coal valuations led the way down. Risk warning: Economic data falling short of expectations, overseas policies tighten more than expected.