New Logic of AI Field Investment: Finding the Best Intersection of Certainty and Growth

Recently, as major US tech giants successively released lackluster financial reports, concerns about whether artificial intelligence is being overhyped have resurfaced in the market. Under panic, AI concept stocks represented by NVIDIA experienced drastic fluctuations, further widening the market's divergence. The stock prices of industry leaders have experienced sudden changes, and the impact this will have on artificial intelligence, the hottest global investment theme in recent years, is clearly the most pressing issue for investors at the moment.

A comprehensive review of the financial reports of companies such as Google, Microsoft, and Amazon reveals that these tech giants are facing similar challenges: deep investments in AI with meager current returns. Despite management painting a rosy future, the massive short-term investments have evidently severely eroded the profits of these giants.

Indeed, in terms of the imaginative growth prospects of artificial intelligence, perhaps as Alphabet's CEO Sundar Pichai said, "the risk of 'underinvestment' in AI far exceeds the risk of 'overinvestment'." However, from the perspective of secondary market investors, as the second half of the AI era unfolds, "AI to reality" is bound to become the new keyword after the industry bubble bursts. At this point, investing in targets that clearly benefit from the advancement of AI technology may be a more prudent investment strategy.

Zhītōng Finance App believes that Lenovo Group (00992), the global leader in AI terminal hardware landing, is a company that combines certainty and growth in the current AI wave. Recently, Lenovo Group released its Q1 FY2025 financial report. The data shows that during the reporting period, Lenovo achieved revenue of RMB 111.9 billion, a year-on-year increase of 20%; net profit under non-Hong Kong financial reporting standards was RMB 2.3 billion, a strong increase of 65% year-on-year.

The steep curve of core financial data once again confirms that Lenovo Group is at the forefront of implementing AI applications. Through this latest financial report that provides an early "sneak peek" into Lenovo's medium to long-term development direction, investors may have higher expectations for this "trendsetting" digital economy leading enterprise in the AI era.

Exceeding Expectations Confirms Return to Growth

After presenting a comprehensive and high-quality performance in the Q1 FY2025 report, Lenovo Group's return to a growth cycle is even more pronounced.

Looking at the business segments, the IDG, ISG, and SSG divisions all achieved varying degrees of growth during the reporting period. Among them, the IDG business contributed revenue of RMB 82.7 billion, an 11.3% year-on-year growth, outperforming expectations; following a turning point in the previous fiscal year, the ISG business continued its momentum in this quarter, achieving revenue of RMB 22.9 billion, a staggering 65% year-on-year growth; meanwhile, the SSG business continued its strong growth trend from before, maintaining double-digit growth for the 13th consecutive quarter, with revenue of RMB 13.65 billion in this quarter, an increase of 10% year-on-year Specifically, benefiting from the gradual recovery of the global PC market after breaking seven consecutive quarters of decline, as well as significant growth in global smartphone and tablet shipments, Lenovo's IDG business revenue and operating profit both saw substantial increases in the first quarter. In terms of profitability, the operating profit of this segment increased by 27% year-on-year, with the corresponding operating profit margin rising to 7.3%, reaching a historical high level.

In the PC sector, Lenovo took the lead in the Chinese market in May by releasing AI PCs with 5 major features, signaling the beginning of a strong product cycle for Lenovo in the AI PC era. In the smartphone sector, Lenovo's product shipments and activations both saw double-digit growth compared to the same period last year, with a revenue growth of 28%. Revenue growth rates from the Asia-Pacific and Europe-Middle East-Africa regions reached as high as 245% and 59% year-on-year, respectively. It is worth noting that high-end products accounted for 31.6% of the IDG business, indicating a further strengthening trend towards high-end Lenovo smart devices.

While the performance trend of the IDG business is mainly characterized by steady growth, the performance of the ISG business can be described as explosive. Following the turning point in the 2024 fiscal year, the ISG business showed strong growth this quarter, with revenue growth exceeding 60%, reaching a historical high in storage business revenue. At the same time as a significant expansion in scale, the ISG business's reduction in losses was significant, indicating that the business is moving in a positive direction.

Meanwhile, the SSG business continued to show steady growth above the average level of the IT services market. In addition to stable revenue growth, the operating profit margin of this business also remained at a high level of 21%, indicating the continued consolidation of its position as a profit engine for the Lenovo Group.

With all aspects of the business performing well, and with steadily improving profitability and prudent management of operating funds, Lenovo Group's operating cash flow has been further optimized, with a year-on-year growth rate of 22% this quarter.

Looking at Lenovo Group's first quarter report, the Smart Finance app believes that the company has made a strong start in the 2025 fiscal year, indirectly indicating that the recovery trend in the consumer electronics industry is becoming more significant, and Lenovo, as a global leader in the digital economy, is leading a new round of significant growth. It also confirms that the company's transformation led by services continues to play a positive role, and the accelerated landing of AI-related products and services contributes new momentum, leading Lenovo into a new stage of development.

"AI to Reality" Trendsetter

If we were to list the hottest investment themes globally in the past two years, AI would undoubtedly be at the forefront. However, with the recent significant volatility in US tech stocks, market investment logic seems to be loosening, with more and more analysts and investors leaning towards caution and conservatism.

As the technology industry accelerates the "bubble squeeze," the next phase of market hot money may favor companies that can quickly implement artificial intelligence applications. From this perspective, the latest financial report confirms that Lenovo Group, with a combination of certainty and growth in fundamentals, is clearly one of the targets that secondary market investors should not overlook.

Looking ahead, there are many highlights in Lenovo Group's growth. First, in Lenovo's traditional stronghold of the PC business, as the computer market accelerates its transition to Windows 11 and with a significant increase in the supply of AI PCs, the global PC market is expected to enter a new replacement cycle As the king of the PC era, Lenovo has accumulated a first-mover advantage after strategically laying out the AI PC track, and with continuous R&D investment, the company's strong product cycle is expected to begin, potentially allowing Lenovo to continue its legend in the AI PC era.

Beyond PCs, in the field of smartphones, Lenovo's latest financial report confirms that its products are establishing a greater influence globally, with a continuous increase in the proportion of high-end products, which can also be seen as a microcosm of Lenovo's high-quality expansion in the smartphone category.

In the ISG business direction, Lenovo is actively focusing on hybrid infrastructure and has built an AI-oriented "one horizontal and five verticals" strategic framework. From an industry perspective, according to IDC's forecast, the global traditional infrastructure market's compound annual growth rate is expected to reach 10% from 2024 to 2027, while the global AI infrastructure market's compound annual growth rate during the same period may reach 15%. Given the strong growth momentum of Lenovo's ISG business in this fiscal quarter, it is expected that the Lenovo ISG business will further advance in the thriving industry opportunities, and the profitability of this business may undergo a "qualitative change" in this process.

Turning to the SSG business, the arrival of the hybrid AI era has brought new vitality to the IT services market. Positioned within it, leveraging a full-stack AI layout, Lenovo expects to better meet customer needs in various scenarios. As the customer base further expands and the value proposition strengthens, SSG, as the group's growth engine, is also expected to continue to expand its financial contribution to Lenovo.

Based on a comprehensive analysis of the potential growth points across multiple dimensions mentioned above, it is not difficult to see that Lenovo Group, actively promoting "AI to reality," has indeed reached a key point in the beginning of a new growth cycle. From a capital market perspective, compared to tech stocks in the U.S. market that are already highly valued and have high stock prices, and where market hot money has shown signs of "aesthetic fatigue," Lenovo Group, with strong current performance and ample growth potential, is clearly worth investors' increased attention