2025-03-11 01:43Investment Rating - The report recommends a focus on the IAAS (Infrastructure as a Service) value chain, particularly highlighting Alibaba and Kuaishou as preferred investment opportunities within the generative AI sector [3][15][21]. Core Insights - The report establishes a four-stage framework for generative AI development in China, indicating that the industry has entered Stage 2, characterized by rapid growth in compute power and the integration of generative AI features into existing applications [3][9][16]. - The introduction of DeepSeek's V3 and R1 language models is seen as a critical inflection point for generative AI adoption in 2025, driving significant increases in compute power consumption [5][38]. - The report draws parallels between the current generative AI evolution and the transition from PC internet to mobile internet, suggesting that similar dynamics will influence market leaders and disrupt traditional business models [4][23][32]. Summary by Sections Stage 1: Large Language Model Development - This initial stage focused on creating and refining large language models, which serve as the foundational technology for subsequent advancements in AI applications [10]. Stage 2: Adoption of Gen AI by Existing Applications and Services - The report indicates that China's generative AI development has entered Stage 2, marked by the rapid integration of generative AI features into existing internet applications, although the financial benefits from these applications are yet to be fully realized [16][21]. Stage 3: Increased Consumption of Internet Services - In this stage, a significant increase in the consumption of internet services is expected as generative AI adoption becomes more widespread, leading to substantial financial benefits for internet operators [16][21]. Stage 4: Emergence of Native Gen AI Killer Applications - The report anticipates the rise of native generative AI applications that will reshape the competitive landscape and create new business models and revenue streams [12][33]. Investment Strategy Across Stages - The report outlines specific investment strategies for each stage of generative AI development, recommending a focus on the IAAS value chain in Stage 2 and a rotation to application beneficiaries in Stage 3 as they begin to deliver tangible financial benefits [13][21]. Market Dynamics and Financial Projections - The report provides projections for the Chinese cloud market, estimating a growth from RMB 187.18 billion in 2020 to RMB 580.77 billion by 2024, with significant year-on-year growth rates [20]. - Major players in the IAAS market include Alibaba, Tencent, and Baidu, with market shares and revenue projections detailed for each [19][20].