Cinda: ByteDance AI continues to increase its investment in both the consumer and business sectors. It is recommended to pay attention to Hand Enterprise Solutions (300170.SZ) and others.

Cinda released a research report stating that Byte's investment in AI continues to increase, and Byte's AI computing power investment ranks first among major companies. In terms of organizational structure, ByteDance has set up the Flow department and Seed team specifically dedicated to the development and basic research of AI large models. In terms of resource investment, ByteDance is at the forefront of the industry in server procurement, IDC construction, and AI IaaS service scale. Byte's advantage in the consumer sector lies in traffic and ecological advantages, and large models will be its winning strategy in the business sector. In the consumer sector, Byte helps Douyin, Toutiao, and other traffic entrances and streaming methods under its umbrella to help Douyin build a user size advantage. The business-to-business (B2B) agent market is expected to take the lead, benefiting information technology companies greatly. Investment recommendations: Hand Enterprise Solutions (300170.SZ), Espressif Systems(688018.SH), Range Intelligent Computing Technology Group (300442.SZ), LENOVO GROUP (00992). Cinda's main points are as follows: Continued increase in AI investment, Byte's AI computing power investment ranks first among major companies. In terms of organizational structure, ByteDance has set up the Flow department and Seed team specifically focusing on AI large model application development and basic research. In terms of resource investment, ByteDance is at the forefront of the industry in server procurement, IDC construction, and AI IaaS service scale. Specifically, in 2024, Byte's server procurement reached 8 billion US dollars, ranking first among major enterprises in China, and GenA IIaaS service market shares in the second half of 2023 and the first half of 2024 ranked first and second in the domestic market, respectively. Douyin has made rapid progress in a short period, constantly refreshing its performance in various tests. In December 2024, compared to the May version, the comprehensive model capability of Douyin's large model targeting the MMLU_pro evaluation set increased by 32%, aligning with the level of GPT-4o. In just the past month, Douyin's large model 1.5 has explored new boundaries of capabilities, achieving the best results on multiple authoritative evaluation benchmarks such as knowledge, code, reasoning, and Chinese, outperforming top models in the industry like GPT-4o and Claude 3.5 Sonnet. Douyin's visual understanding input price per thousand tokens is 0.003 yuan, lowering the industry average price by 85% (data as of December 18, 2024). ByteDance has a unique advantage in traffic and ecology in the consumer sector, and large models will be its winning strategy in the business sector. In the consumer sector, Byte helps Douyin establish a user size advantage through its traffic entrances and streaming methods such as Douyin, Toutiao, and TikTok. According to data from 36Kr, in December, Douyin ranked first, Kimi second, and Wenxiaoyan third, with Douyin's user base increasing by 18.64%, reaching 71.16 million monthly active users, demonstrating a significant advantage over competitors and providing a broad user base for the future promotion of consumer applications or hardware. In the business sector, Byte is building a B-end ecological chain through its infrastructure platform Volcano Engine, the AI application development platform Button, and the enterprise collaboration platform Feishu. However, compared to giants like Alibaba and Huawei, Byte is a latecomer in the B-end market, with a significant gap in user data. Large models are essential tools for enterprises in the future, and whether Byte can win in the B-end market will depend on these tools. The B-end agent market is expected to take the lead, benefiting information technology companies greatly. According to Guanyan Tianxia data, the AI Agent market in China was 55.4 billion yuan in 2023 and is expected to reach 852 billion yuan by 2028, with an average annual compound growth rate of 72.7%, potentially restructuring the entire SaaS application system. In B-end scenarios, agents can serve as digital employees, personal assistants, marketing customer service representatives, and other positions, truly creating value for enterprises. At the enterprise investment level, according to data from Volcano Engine, currently 64% of Chinese enterprises expect their investment in AI to grow by 10%-30%. Deep application of large models in enterprises needs to be implemented through agent embedding in applications, relying on enterprise information technology companies to land, and information technology companies are expected to receive token revenue shares, especially benefiting information technology companies with widely implemented scenarios. Risk factors: Policy progression falling below expectations; Technological development falling below expectations; Market demand falling below expectations.