Bank of America Securities: Expects AI to be the main growth driver for software stocks. Prefers KINGDEE INT'L (00268) and MEITU (01357).

Bank of America Securities released a research report stating that during the recent investor event, they had discussions with management of China National Software & Service companies, data centers, and cloud computing companies such as KINGDEE INT'L (00268), MEITU (01357), Beijing Kingsoft Office Software, Inc (688111.SH), and Yonyou Network Technology (600588.SH). They found that the software companies' progress in AI monetization is stable, with the value of AI-related contracts continuing to rise; at the same time, AI agents and AI coding deployment are driving operational efficiency improvement for software companies. The bank expects that software companies with a higher proportion of subscription revenue such as Kingdee and Meitu will show higher growth visibility; they believe that AI development will drive strong growth in data center demand, with positive progress in domestic AI chip research supporting order increases; AI also drives strong growth in public cloud business. Currently, they prefer high-visibility growth companies with stable downstream demand and a high proportion of recurring income, with their top picks in the software sector being Kingdee and Meitu, both given a "buy" rating with target prices of HKD 20.7 and 13.5 respectively. In the data center and public cloud sector, the bank is more bullish on GDS Holdings Ltd. Sponsored ADR Class A (09698, GDS.US), VNET Group, Inc. Sponsored ADR (VNET.US), and KINGSOFT CLOUD (03896, KC.US), all driven by strong AI demand, all outperforming expectations, rated as "buy". Bank of America Securities has also raised the target price of MING YUAN CLOUD (00909) from HKD 3.7 to 4, maintaining a "neutral" rating.