Huaxi: DeepSeek leads the transformation of AI applications. "AI + consumer" is expected to usher in a massive explosion.

Huaxi released a research report stating that DeepSeek has successfully achieved a "scissor difference breakthrough" between the performance and cost of large-scale AI models for the first time. This breakthrough significantly reduces the cost of AI applications, with a decrease of 10%-20% compared to traditional models. Thanks to algorithm innovation leading to performance improvements, DeepSeek-R1 has become the first open-source large reasoning model that is comparable to OpenAI's o1. With the continuous progress of AI technology and significant cost reductions, combined with increased policy support (as mentioned in a recent State Council executive meeting highlighting "strengthening consumer brand leadership, supporting the accelerated development of new consumption, promoting 'AI + consumption,' etc.), the integration of AI and the consumer sector is expected to see explosive growth, bringing new opportunities for industry investment. Huaxi's main points are as follows: DeepSeek is leading the transformation of AI applications, and the explosion of "AI + consumption" is expected DeepSeek has achieved a significant breakthrough in the performance and cost of large-scale AI models for the first time through optimization in algorithm architecture, training methods, and open-source ecosystem collaboration. This breakthrough significantly reduces the cost of AI applications by 10%-20% compared to traditional models. Thanks to the performance improvements brought about by algorithm innovation, DeepSeek-R1 has become the first open-source reasoning model with performance comparable to OpenAI's o1. In addition, the construction of DeepSeek's open-source ecosystem has promoted a positive cycle of "more developers, stronger models, greater attractiveness," leading to a favorable development trend. With the continued progress of AI technology and significant cost reductions, combined with increased policy support (as mentioned in a recent State Council executive meeting highlighting "strengthening consumer brand leadership, supporting the accelerated development of new consumption, promoting 'AI + consumption,' etc.), the integration of AI and the consumer sector is expected to see explosive growth, bringing new opportunities for industry investment. Huaxi's consumer team uses specific indicators such as driving logic (growth reasons and catalysis), industry scale (current and potential market size), commercial realization (product/service maturity and customer acceptance), vertical landing (possessing exclusive data, AI technology/model matching downstream demand), technical threshold (complexity of technical requirements), competitive landscape (situation of various participants in the industry chain), applicable scenarios (specific downstream applications), policy environment (related policies being friendly or restrictive), and beneficiary targets as a framework to dig deep into the key investment directions of "AI + consumption." Combining AI applications with high-quality hardware carriers opens up new growth space for consumer scenarios The rapid development of AI technology has led to a series of new hardware carriers, which not only serve as the physical support for the deployment of AI capabilities but also greatly expand the boundaries of consumer scenarios. New hardware such as AI glasses and AI toys, represented by integrating large model technology, are transitioning from single-function to multi-function and from passive response to active service. For example, AI glasses, with functions such as voice assistants, real-time translation, and health monitoring, have become intelligent assistants in daily life and professional settings; AI toys, through emotion recognition and personalized interaction, have evolved from traditional entertainment tools to intelligent companions for children's education and emotional support. These new hardware carriers not only lower the threshold for using AI technology but also enhance user experience and reduce privacy risks through localization processing and multimodal interactions. With continuous breakthroughs in hardware technology and the explosion of generative AI, AI new hardware carriers are gradually penetrating vertical fields such as health, education, and entertainment, pushing the consumer-level AI hardware market scale to further expand from 1.1 trillion yuan in 2023, becoming a significant driver in the AI + consumption wave. Combining AI applications with downstream software services achieves cost reduction, efficiency improvement, and intelligent upgrade of the consumer industry AI software, through the application of large model technology, is bringing significant cost reduction and efficiency improvement effects to various industries, becoming a core force driving the intelligent upgrade of industries. In the e-commerce sector, AI content generation technology significantly reduces the cost of businesses producing advertising materials and product descriptions, while also enhancing conversion rates and user satisfaction through intelligent recommendations and demand mining; in the education sector, AI-driven personalized learning solutions and virtual teacher assistants not only lower the cost of manual teaching but also optimize teaching effectiveness through precise data analysis. In addition, the application of AI software in multimodal interaction, smart customer service, data analysis, etc., further enhances operational efficiency and service quality. Other focus areas including human resources, elderly care, exhibitions, etc., where AI applications will bring industry transformation and upgrade. With the continued decrease in the cost of AI calls (such as DeepSeek R1's input price of only 1 yuan per million tokens), AI software will achieve deep penetration in more industries, driving the intelligent upgrade of the entire consumer industry chain. Investment recommendations: 1) AI + glasses: Beneficiary targets include Mingyue Optical Lens, CONANT OPTICAL, Doctorglasses Chain; 2) AI + toys: Beneficiary targets include Shifeng Cultural Development, Zhejiang Jinke Tom Culture Industry, Alpha Group; 3) AI + education: Beneficiary targets for 2C education include Doushen(Beijing) Education & Technology Inc., TIANLI INT HLDG, and for 2B equipment include Chengdu Jiafaantai Education Technology, Guangzhou Shiyuan Electronic Technology; 4) AI + e-commerce: Beneficiary targets include Kidswant Children Products, Zhejiang China Commodities City Group, Focus Technology; 5) General AI + home appliances: Beneficiary targets include Ecovacs.6) AI + Tourism: Beneficiaries include Ctrip and Zhejiang Sunriver Culture Tourism. 7) AI + Apparel: Beneficiaries include ZheJiang KangLongDa Special Protection Technology, Shandong Nanshan Fashion Sci-Tech, and Jiangsu Hanvo Safety Product. 8) AI + Siasun Robot & Automation: Beneficiaries include Zhejiang Sanhua Intelligent Controls, Ningbo Dechang Electrical Machinery Made (supply chain), and Xiaomi Group (whole machine). 9) AI + Exhibition: Beneficiaries include Zhejiang Meorient Commerce & Exhibition Inc. and DLG Exhibitions & Events Corporation. 10) AI + Display: Beneficiaries include Guangzhou Shiyuan Electronic Technology, TCL ELECTRONICS, and Hisense Visual Technology. 11) AI + Internet: Beneficiaries include Alibaba, Tencent, and Meituan. 12) AI + Elderly care: Beneficiaries include Shenzhen Sunwin Intelligent and Hangzhou EZVIZ Network. 13) AI + Human Resources: Beneficiaries include Beijing Career International, FESCO Group Co., Ltd, and RENRUI HR."Bonjour, comment a va?" "Hello, how are you?"