Yamato: Reaffirming a positive rating on the gaming industry. Top picks are TENCENT (00700), BILIBILI-W (09626), and NTES-S (09999).

Daiwa released a research report stating that artificial intelligence (AI) has improved efficiency, scalability, and operational capabilities in the gaming industry, but core creative creation is still driven by humans. The firm believes that AI will expand content supply, but attention and profitability may further concentrate on top platforms. Daiwa still believes that key project reserves are catalysts for recent reevaluations. Given that TENCENT (00700), Bilibili, Inc. Sponsored ADR Class Z (09626/BILI.US), and Netease Inc Sponsored ADR (09999/NTES.US) have comprehensive capabilities, foresight, strong operational strength, and a solid project pipeline in the AI disruption era, the firm prefers these three stocks. However, the firm also points out some major risks, including delays or underperformance in new game releases, and the emergence of new disruptive tools or traffic acquisition tools at a faster pace than expected. The firm rates Tencent as "Buy" with a target price of 517 Hong Kong dollars; rates Bilibili, Inc. Sponsored ADR Class Z Hong Kong and US stocks as "Buy" with target prices of 199.2 Hong Kong dollars and 24.95 US dollars respectively; rates Netease Inc Sponsored ADR Hong Kong and US stocks as "Buy" with target prices of 186.6 Hong Kong dollars and 115.87 US dollars respectively.