China Galaxy Securities: The Era of AI Agents Begins, A New Chapter for Technology Domestic Demand

According to the Zhitong Finance APP, China Galaxy Securities has released a research report stating that the rise of AI Agent is reshaping the AI industry chain and bringing new investment opportunities. The alleviation of local government debt risks helps provide ample funding support for infrastructure such as digital infrastructure, driving marginal improvements in industry cash flow. Central state-owned enterprises are expected to welcome a value reassessment, and the trend of mergers and acquisitions in the industry chain is accelerating. Coupled with the Federal Reserve's interest rate cut cycle, the dual approach of monetary and fiscal policies creates a resonance between the "numerator" and "denominator," which is expected to usher in a "Davis Double Play," further raising the overall valuation center level of the industry.

The main points of China Galaxy Securities are as follows:

Review of the Computer Sector's Performance Over the Year

From the beginning of the year to now, the computer index has outperformed the CSI 300, showing high elasticity. Reviewing the overall performance of the industry, the revenue growth rate in the first three quarters has improved year-on-year, and the net profit attributable to the parent company has significantly increased year-on-year, but the gross profit margin has declined year-on-year in the first three quarters. A significant policy was introduced at the end of September, leading to a substantial rebound in the sector, with the rebound magnitude exceeding that of the CSI 300, peaking in mid-November and maintaining fluctuations. In terms of sub-sectors, from the beginning of the year to now, financial IT has performed exceptionally well, with an increase of 75.11%, followed by cloud computing (33.43%), medical IT (27.20%), and defense IT (23.73%).

The sector is expected to welcome a "Davis Double Play" on both the numerator and denominator sides in 2025, further boosting the valuation center.

With the Federal Reserve starting its interest rate cut cycle and the introduction of the "924" policy package, under the continuous monetary easing in the domestic market, fiscal policies are being ramped up. The Central Economic Work Conference in December clearly proposed the goal of "leading the development of new productive forces with technological innovation and building a modern industrial system."

Most enterprises in the computer industry have a high proportion of G-end revenue. This is the most significant measure to support debt reduction in recent years. The alleviation of local government debt risks helps provide ample funding support for infrastructure such as digital infrastructure, which is expected to increase industry informatization orders and drive marginal improvements in industry cash flow. Coupled with the Federal Reserve's interest rate cut cycle, the resonance between the "numerator" and "denominator" is expected to further raise the overall valuation center of the industry.

The rise of AI Agent is reshaping the AI industry chain and bringing new investment opportunities.

It is expected that by 2028, the scale of China's AI agent market will surge to 852 billion yuan, with a compound annual growth rate of 72.7%. The rapid development of AI agent technology marks a transition from training-dominated to reasoning-dominated approaches. Corporate capital expenditures will shift from primarily R&D capital expenditures to primarily operational capital expenditures, and the AI application ecosystem is expected to enter a prosperous period.

AI Agent will be the necessary path to the era of general artificial intelligence. The rapid iteration and upgrading of large models will enhance the capabilities of AI Agents. In the long term, the key to AI Agents lies in reasoning capabilities. As AI Agents penetrate widely in the future, the demand for reasoning computing power will grow exponentially, and the operational nature of reasoning Capex will become increasingly evident.

Central state-owned enterprises are expected to welcome a value reassessment, and the trend of mergers and acquisitions in the industry chain is accelerating. On one hand, against the backdrop of global industrial chain restructuring, the counter-cyclical adjustment role of central state-owned enterprises will effectively mitigate the impact of external shocks on the industrial chain, resulting in relatively higher stability in their long-term development, making future cash flow predictions more reliable, thereby increasing free cash flow on the numerator side. At the same time, central state-owned enterprises often have lower financing costs, which helps to reduce the discount rate on the denominator side, while the improvement in perpetual growth rates can enhance the overall valuation of the enterprises.

On the other hand, the Xinchuang industry aims to solve the "bottleneck" problem in core technology fields. In recent years, intensive policy catalysis in the Xinchuang industry has made the role of central state-owned enterprises more solid within the industrial chain. Xinchuang emphasizes ecological construction, from IT infrastructure to application software, and then to IT security. Through industrial collaboration and ecological construction, central state-owned enterprises can achieve more efficient resource allocation and a more mature industrial ecosystem. At the same time, mergers and reorganizations of Xinchuang central enterprises also help to fully leverage the national system to build a high-end information industry base in China and usher in a performance inflection point.

Investment Suggestions:

It is recommended to focus on iFLYTEK (002230.SZ), Nengke Technology (603859.SH), Ruantong Power (301236.SZ), Runze Technology (300442.SZ), Wanji Technology (300552.SZ), etc.

Risk Warning: Risks of macroeconomic growth being lower than expected, supply chain risks, risks of policy advancement being lower than expected, and risks of technological development being lower than expected