China Securities Co., Ltd.: The future A-share market will transition from "hard to soft", end-side and application areas may see explosive growth.

China Securities Co., Ltd. issued a research report stating that breakthroughs in key technologies centered around artificial intelligence are bringing a new wave of industrial innovation. "AI +" has become the most important investment theme in the A-share market. Through a deep comparison and review of two market trends, China Securities Co., Ltd. believes that artificial intelligence has entered a stage of prosperity confirmation (similar to the beginning of 2013) and is expected to become a long-term main theme in the market. Future market trends may shift from "hard to soft," spreading from leading companies, with a focus on explosive growth in the end and application fields. The main viewpoints of China Securities Co., Ltd. are as follows: Core viewpoint: Breakthroughs in key technologies centered around artificial intelligence are bringing a new wave of industrial innovation. "AI +" has become the most important investment theme in the current A-share market. Through a deep comparison and review of two market trends, we believe that artificial intelligence has entered a stage of prosperity confirmation and has the potential to become a long-term main theme in the market. Future market trends may shift from "hard to soft," with a focus on explosive growth in the end and application fields. By comparing the differences and similarities between the two market trends of "Internet +" and "AI +," and looking ahead to the future development of the market, we have derived fifteen insights: Insight 1: Breakthroughs in new technologies are often catalysts for industrial change and can quickly change the operating methods and market competition landscape of traditional industries. Insight 2: Technological innovation often appears first overseas, and the early stage of A-share market trends often reflects overseas trends. Investors tend to focus more on overseas leading companies or related industry chain targets. Insight 3: Policy support is often an important driving force for technological innovation and industry development, as well as an important catalyst for the initiation and promotion of A-share market trends. Insight 4: During a period of macroeconomic pressure, market liquidity is often released, creating a favorable investment environment for the capital market. At this time, high-growth industries, especially in the technology sector, tend to become the focus of investment. Insight 5: The influence of public funds on this round of market trends is relatively small, which is beneficial in eliminating the pressure of ranking from public funds, making investment decisions more long-term and focusing on companies with long-term growth potential rather than relying on short-term catalysts. Insight 6: Leverage funds, represented by margin trading, remain a key source of incremental funds in this round of market trends. Leverage funds have a high risk appetite and a preference for technology growth sectors, which will also be reflected in this round of market trends. Insight 7: The "positive cycle" characteristic of market cap leaders during the era of "passive rise" can lead to slower stock price increases due to passive fund inflows, but the rise in industries/factors that are favored by funds will be more firm and sustainable. Insight 8: As the United States slows down the development of a new generation of large models with huge computing power, Chinese AI companies have the opportunity to catch up, and A-shares are beginning to turn towards the "AI +" theme. Insight 9: There is a close connection between the rise of the technology growth style and market liquidity. With the promotion from regulatory authorities and other departments, the micro-liquidity issues that have plagued A-shares have significantly improved in the past six months. Insight 10: With the shock of a group of domestic large models such as DeepSeek to the world, China's innovation capabilities are gaining global recognition. Chinese technology leaders are breaking away from their long-standing valuation discounts and undergoing reevaluation of their value. Insight 11: Compared to the previous round, speculation around mergers, restructuring, private placements, and new listings in this round of the "AI +" market trends is expected to diminish. The sustainability of fundamental growth in listed companies in this round may be significantly stronger. Insight 12: By 2025, the A-share AI investment logic will shift from the early stage of "overseas mapping" to domestic industrial development, from valuation speculation to performance realization. The rotation of the industry chain is expected to shift from "hard to soft," with the end and application fields on the eve of an explosion, likely becoming the next phase of the AI investment theme. Future attention should be placed on opportunities in the computer and media industries. Insight 13: Focus on the growth opportunities in the end field such as Siasun Robot & Automation, smart cars, wearable devices, and AI toys, and in vertical applications such as education, precision diagnosis, and optimization of drug development. Insight 14: The most important factor for the sustainability of the market trends is the development of the domestic artificial intelligence industry, including the competitive advantages of frontier technologies globally, continuous industrial catalysis (seeing capital expenditure growth in the early stage, end penetration and the emergence of popular applications in the mid-term), and confirmation of the prosperity of the upstream and downstream sectors. Factors such as periodic trading overheating may cause short-term disturbances, but do not affect the long-term logic of artificial intelligence, providing opportunities for buying at lower levels. Insight 15: Factors that may lead to the end of the market trends include: a widening technology gap with the United States, bottlenecks in algorithm development, results of upstream and downstream prosperity confirmation that fall short of expectations, overvaluation of technology stocks, significantly overweighting of active equity holdings, a substantial increase in interest rates due to a stronger-than-expected economic recovery, and the emergence of other main thematic trends. Risk warning: a widening technology gap with the United States; bottlenecks in algorithm development; results of upstream and downstream prosperity confirmation fall short of expectations; overvaluation of technology stocks and significant overweighting of active equity holdings lead to a substantial increase in interest rates due to a stronger-than-expected economic recovery.