CITIC Construction Investment: Reviewing Past Growth Bulls, How Will This Round of AI Market Play Out?

According to the Zhitong Finance APP, CITIC Construction Investment Securities released a research report stating that DeepSeek's low cost, open-source characteristics, and strong reasoning capabilities are expected to significantly promote the development of domestic AI applications and edge AI. In the industrial chain, sectors such as computer/media (AI applications), robotics/electronics/intelligent driving (edge AI), and domestic computing power chains are expected to benefit significantly. How to grasp the rhythm of interpretation? Before the fundamentals are verified, the key short-term tracking indicator may be DeepSeek's traffic; in the medium term, if edge AI and new application products experience a surge in traffic, or if corporate profit margins improve (the earliest focus on the fundamental verification period is the quarterly report), and if domestic AI investment significantly increases, then the market interpretation can refer to smartphones and electric vehicles, mapping the overseas changes to the domestic industrial prosperity.

CITIC Construction Investment Securities' main viewpoints are as follows:

The breakthrough progress of DeepSeek can be compared to the Chat GPT moment in the United States, with its low cost, open-source characteristics, and strong reasoning capabilities expected to greatly promote the development of domestic AI applications and edge AI. DeepSeek has confirmed that the overseas computing power blockade against China is not insurmountable but can be partially compensated through efficient training methods; in addition, its high cost-performance characteristics can rebalance the cost-performance ratio between corporate AI investment and output. So far, multiple cloud vendors and various industry entities have integrated or merged with DeepSeek; at the same time, its strong reasoning capabilities are expected to accelerate the development of vertical model applications and the explosion of AI applications and edge AI. In the industrial chain, sectors such as computer/media (AI applications), robotics/electronics/intelligent driving (edge AI), and domestic computing power chains are expected to benefit significantly.

Since the beginning of the year, driven by DeepSeek, the TMT market has performed well. From a strategic perspective, how to grasp the subsequent rhythm of interpretation? Based on historical experiences from smartphones, new energy vehicles, and recent domestic and international AI markets, the bank provides the following references:

1. Before the fundamentals are verified, refer to the overseas mapping market of AI in the first half of 2023, as well as the explosive application market driven by Kimi, Doubao, and others. The key short-term tracking indicator may be DeepSeek's traffic.

The access data of Chat GPT in 2023 shows a significant positive correlation with the domestic technology market. As the access volume of Chat GPT grew into a bottleneck in May, coupled with the arrival of the earnings report season, the domestic technology sector lacked performance verification, and the market showed signs of overheating, leading to peaks and corrections in the computer and media sectors. Similarly, the rapid growth of traffic for the explosive application Kimi in February 2024 was also the main driver of the media sector's explosion at that time. Trading indicators such as the TMT index's transaction volume ratio reaching overheating zones may exacerbate market volatility but cannot determine the market height.

1. In the medium term, if DeepSeek's traffic explosion successfully transmits to related edge applications, such as bringing about a surge in traffic for new products, or if corporate profit margins improve (the earliest focus on the fundamental verification period is the quarterly report), and if domestic AI investment significantly increases, then the market interpretation can refer to smartphones and electric vehicles, mapping the overseas changes to the domestic industrial prosperity.

Looking back at the smartphone and new energy vehicle markets, the first phase was characterized by overseas blockbuster products landing and overseas mapping, and both formed a second wave of investment in domestic prosperity that maintained a long-lasting continuity. On the one hand, this was driven by the accelerated localization of overseas leading supply chains; more importantly, after the overseas business models landed, domestic blockbusters emerged, penetration rates accelerated, and capital expenditures in the industrial chain significantly increased At this time, the performance of the sector is strengthening, making it easier to develop an independent market trend from the bottom up compared to the broader market. Previously, the domestic AI investment cycle lagged behind overseas, with weaker performance realization in the industrial chain, and the market was primarily theme-driven; however, as DeepSeek and Doubao continue to break through, domestic investment in AI is increasing, and the prosperity of the local AI industrial chain is currently on the rise.

Risk Warning: The effectiveness of domestic demand support policies is lower than expected; stock market selling pressure exceeds expectations; geopolitical risks; fluctuations in the U.S. stock market exceed expectations