Guotai Haitong: The accelerated development of AI applications combined with the upward trend of the cultural and entertainment sector. Focus on the performance of game, film, and television sectors.

Guotai Haitong released a research report stating that the media industry is at a critical point of accelerated development in AI applications and the upward cycle of the entertainment industry, with a good performance expected in the index in 2025, and the possibility of continuing strong in 2026 under the resonance of products and policies. From the perspective of AI application, the promulgation of the State Council's "Opinions on Deepening the Implementation of the 'AI+' Action" in August 2025 signified that AI has risen to the national strategic level. "AI+" is expected to continue the trend of "Internet+", creating a new ecology, new scenarios, and new businesses. Looking from the perspective of the entertainment industry, domestic IPs such as "Ne Zha" and "Black Myth: Wukong" are not only popular among consumers in China but have also sparked a global craze. Main points from Guotai Haitong are as follows: The media index had a maximum increase of over 40% within the year, with the gaming sector leading the way. From January to November 2025, the lowest point of the media index was on January 13, and the highest point was on September 25. The maximum decrease during the period was 6.42%, while the maximum increase was 42.24%. The gaming sector showed the most outstanding performance among the sub-sectors, with a maximum increase of 98.45%. Additionally, the film and television index benefited from the 2025 Chinese New Year box office, with a maximum increase of nearly 50%. In terms of performance, the total operating income of the media industry in the first three quarters of 2025 remained robust, with the total net profit attributable to mother increasing by nearly 40% year-on-year. The gaming sector saw a close to 90% year-on-year growth in total net profit attributable to mother, serving as the main driver of industry growth. Golden period of rapid development in AI applications and upward cycle of the entertainment industry. Regarding AI applications, the promulgation of the State Council's "Opinions on Deepening the Implementation of the 'AI+' Action" in August 2025 signified that AI has risen to the national strategic level. "AI+" is expected to continue the trend of "Internet+", creating a new ecology, new scenarios, and new businesses. Looking from the perspective of the entertainment industry, domestic IPs like "Ne Zha" and "Black Myth: Wukong" are not only popular among consumers in China but have also sparked a global craze. Entertainment content forms born during the era of the Internet, such as games and films, also showed strong vitality. Hits like "Supernatural Action Team", "Endless Winter", "Ne Zha: The Naughty Child and the Sea", and "Zootopia 2" continued to shine in 2025, attracting deep engagement from players and audiences. Meanwhile, the State Administration of Radio, Film, and Television introduced new policies in August, aimed at promoting innovation in the entertainment industry, injecting new vitality into content. Focus on the performance of hit games and the implementation of new policies in the broadcasting industry. After several new games were launched in 2025, they demonstrated high traffic and high revenue, enhancing the performance of related companies. The bank believes that similar trends are expected to continue in 2026. At the same time, games like "King of Glory World", "Yi Huan", and "Famous Generals Kill" are poised to be released, making the gaming market still worth looking forward to in the new year. After experiencing several years of a "winter" in the film and television industry, with the implementation of new policies, existing regulatory policies such as "proportion of costume dramas", "one show having two main leads", "limit of 40 episodes", and "ban on mid-roll advertisements" are gradually being cancelled or adjusted. The entertainment industry, including film and television, is expected to receive reversals both in terms of policies and performance. Based on the development progress of AI applications and the upward cycle of the cultural and entertainment sector, games, film and television, AI applications, and IP sectors are recommended. Risk warning: Market competition risk, industry and regulatory policy risk, technological development below expectations, product performance below expectations.