Guosheng Securities: The logic of the release of computing power demand remains unchanged, pay attention to marginal changes in the computing power industry chain.

Guosheng Securities released a research report stating that this week, both domestic and international computing power sectors have experienced significant volatility, with market sentiment generally declining. This decline is mainly due to the impact of global macroeconomic conditions on high-risk assets, combined with GPT4.5 falling short of expectations, leading to a significant short-term decline due to resonating factors. However, the logic of computing power demand release remains unchanged, with the need for breakthrough innovations overseas to drive computing power demand. The AI industry in China started late, with a low base, so it is important to focus on marginal changes in the computing power industry chain. Guosheng Securities' main points are as follows: Macro level: US economic activity falling + tariff US macroeconomic data and tariff policies suggest a decline in economic activity. According to data from the World Large Enterprise Research Association, the US consumer confidence index in February was 98.3, significantly lower than January's 105.3, marking the third consecutive month of decline. According to a University of Michigan survey, consumers' long-term inflation rate expectations for the next 5-10 years have been raised to 3.5%, the highest level since April 1995; S&P Global's US February service PMI unexpectedly dropped from 52.9 to 49.7, reaching a new low since January 2023. At the same time, US tariff policies complicate inflation issues, and the Federal Reserve's interest rates face the risk of remaining high. In addition, federal government cost-cutting measures may further weaken employment data. The multiple factors resonating have led the market to believe that US economic growth will undergo a transformation, becoming highly sensitive and experiencing an increase in risk-aversion sentiment. Intermediate level: "Joy" and "Worry" in NVIDIA's earnings report, GPT4.5 falling short of expectations NVIDIA's earnings report exceeded expectations, creating a division in the market. On Thursday, NVIDIA released its FY25Q4 earnings report, with revenue and net profit both exceeding market expectations, and the B-series capacity issues have been resolved, becoming the fastest-growing product in the company's history. However, its outstanding performance did not satisfy the market, with NVIDIA's stock price falling by 8.5% on Thursday. Although the data exceeded market expectations, the degree of outperformance was the smallest since February 2023, indicating a weakening momentum for NVIDIA. At the same time, NVIDIA's profit increase was the smallest since November 2022, shifting the market from a firm choice towards computing power to a division of opinions. Another event this week was the official release of GPT4.5 by Open AI, which, despite some performance improvements, did not bring breakthrough innovation and lagged in the SWE-Bench Verified benchmark compared to OpenAI's deep research and Anthropic's Claude 3.7 Sonnet; it also underperformed in the SWE-Lancer programming test compared to deep research. The underperformance of GPT4.5 further fueled market concerns about the development of AI. Micro level: Focus on domestic marginal changes The emergence of Deep Seek has driven a surge in demand for inference-side computing power, combined with the US further strengthening chip restrictions leading to the accelerated rise of domestic computing power. The market is closely monitoring the marginal changes in various industry chains, with multiple domestic computing power industry chains expected to benefit significantly. The rise in data center demand will accelerate the process of clearing out obsolete data centers, accelerate room renovations, and increase resource utilization; major enterprises will speed up the deployment of large models and strengthen the development of inference-side AI, leading to a surge in computing power demand, benefiting companies involved in computing power leasing; IDC transitioning to AIDC at an accelerated pace, with unit power density rapidly increasing, leading to the mandatory upgrade of related equipment such as liquid cooling and power supplies, generating significant demand through rapid replacement, with companies expected to benefit from this demand. Although these various factors have dampened market sentiment, fundamentally, these events have not changed the narrative of AI. As Huang Renxun stated at a legal conference, AI applications are still in their infancy, and the development of AI agents and multimodal AI will continue to drive high demand for computing power. Currently, both domestic and foreign cloud providers are increasing investment in AI infrastructure construction, with breakthrough innovative technologies only being a matter of time. In the short term, market sentiment towards the prospects of AI development may be shaky, but in the long run, as long as the logic of AI development remains unchanged and industrial development continues according to the norm, the prosperity of the computing power industry chain will eventually return. Overseas breakthrough innovations driving computing power demand are needed, and given that the domestic AI industry started late with a low base, it is essential to focus on marginal changes in the computing power industry chain. Over the weekend, the securities firm also reflected on the market performance after the Chinese New Year. While remaining optimistic about the computing power sector, they will emphasize marginal pricing, focusing on emerging growth directions and individual stocks, such as Wetown Electric Group, MeiG Smart Technology, Optowide Technologies, and Wuxi Taclink Optoelectronics Technology. They also recommend monitoring related industry chains in the data center direction, such as Range Intelligent Computing Technology Group, Wan Guo Data, Shanghai AtHub, Beijing Sinnet Technology, and Guangdong Aofei Data Technology, as well as in the CDN direction, Wangsu Science & Technology. Recommendation: Computing power Optical communication: Zhongji Innolight, Eoptolink Technology Inc., Suzhou TFC Optical Communication, T&S Communications, Optowide Technologies, Advanced Fiber Resources, Accelink Technologies, Wuxi Taclink Optoelectronics Technology, Linktel Technologies, Huagong TecHYuanjie Semiconductor Technology, Cig Shanghai, and Dongguan Mentech Optical & Magnetic.Copper Links: Shenzhen Woer Heat-shrinkable Material, Tongling Jingda Special Magnet Wire. Computing Power Equipment: ZTE Corporation, Unisplendour Corporation, Ruijie Networks, Shengke Communication, Shenzhen Phoenix Telecom Technology, Foxconn Industrial Internet, Wus Printed Circuit, Cambricon, Hygon Information Technology. Liquid Cooling: Shenzhen Envicool Technology, Guangdong Shenling Environmental Systems, Guangzhou Goaland Energy Conservation Tech. Edge Computing Platform: MeiG Smart Technology, Fibocom Wireless Inc., Quectel Wireless Solutions. Satellite Communications: China Satellite Communications, China Spacesat, Genew Technologies, Guangzhou Haige Communications Group Incorporated. IDC: Range Intelligent Computing Technology Group, Beijing Sinnet Technology, Guangdong Aofei Data Technology, Kehua Data Co.,Ltd., RunJian Co.,Ltd. Data Elements Operators: China Telecom Corporation, China Mobile Limited, China United Network Communications. Data Visualization: Beijing Haohan Data Technology, EmbedWay Technologies, Shenzhen Sinovatio Technology. Risk Warning: AI development falls short of expectations, computing power demand falls short of expectations, market competition risks.