CITIC Securities' 24-Year Mid-term Investment Strategy: Three Beams of Light for Computers - New Technology, New Market, New Demand

According to the information from the Wise Finance APP, CITIC Securities released a research report stating that in the first half of the year, due to the slow recovery of market style and industry fundamentals, the overall performance of the computer sector was weaker than the market. In the second half of the year, it is expected that with the continuous recovery of industry fundamentals and macro policy support for the development of the technology industry, coupled with overseas interest rate cuts, the team believes that the sector's performance is expected to improve compared to the first half of the year. In the second half of the year, breaking through first and then establishing a new starting point, seizing the industry investment opportunities brought by the "new" technologies AI, "new" market expansion overseas, and "new" demand industry recovery.

The following is the core summary of the research report:

In the first half of the year, due to the slow recovery of market style and industry fundamentals, the overall performance of the computer sector was weaker than the market. In the second half of the year, it is expected that with the continuous recovery of industry fundamentals and macro policy support for the development of the technology industry, coupled with overseas interest rate cuts, we believe that the sector's performance is expected to improve compared to the first half of the year. As of the close on June 17, 2024, the computer (SWS) index has a year-to-date change of -21.23%, underperforming the CSI 300 index, with overall performance relatively weak. Since June, market risk appetite has increased, and with the intensive catalysis of AI smartphones, AIPC, and others, the computer sector's performance has improved. Currently, institutional holdings, valuations, and trading volumes of computers are all below the median, with a high potential for upward elasticity.

In the second half of the year, breaking through first and then establishing a new starting point, seizing the industry investment opportunities brought by the three "new" elements.

"New" Technology: AI

Computing power remains the industry with the highest demand certainty. Overseas, many downstream cloud vendors are increasing their investment in computing power, and there is a shortage of computing power chips and servers. Domestically, as core participants in digital transformation, operators have a continuous upward demand for domestic computing power procurement.

After completing the first round of AI penetration, MAU continues to break through, expecting the emergence of killer products. The underlying large models continue to iterate, and domestic large models are accelerating their application maturity. Since the beginning of the year, large models at home and abroad, especially multimodal large models, have continued to iterate, driving the MAU of domestic AI applications into the tens of millions. Both domestically and internationally are focusing on the video market, with expectations that office and design scenarios will remain the main landing scenarios. On the other hand, representative vendors of AIPC and AIPHONE such as Apple and Microsoft make it possible for AI applications based on system-level integration to land.

"New" Market: Overseas Expansion

The computer industry's overseas expansion has become a trend, with the "Belt and Road" being an important potential market. Computer companies utilize: 1) supply chain advantages to break through on the hardware product end and conduct global sales, such as financial equipment; 2) software and service enterprises, using high-quality services, compatibility, and high cost-effectiveness, combined with the rapid development of products in domestic scenarios to achieve overseas expansion, such as DCS and CAD in industrial software, offline payment solutions, etc.

"New" Demand: Industry Recovery

Pay attention to industry policies and industrial bidding situations, with bids for electricity and transportation already landing. We expect that with the acceleration of government special bond issuances and the advancement of macroeconomic improvement, the informatization of various industries is expected to gradually recover downstream, focusing on directions such as transportation, electricity, healthcare, finance, and industry information creation that already have policies or bidding documents released