2025-05-09 05:02Investment Rating - The report recommends an "Accumulate" rating for Alibaba, Kingsoft Cloud, and GDS, with specific upgrades for Kingsoft Cloud ADR to "Buy" and initiation of coverage for Kingsoft Cloud-H at "Buy" [4][14][13]. Core Insights - The global cloud computing market is projected to grow significantly, with penetration still below 20% of total IT workload, indicating ample room for growth [3][43]. - Generative AI is identified as a key growth driver for the cloud market, with China's cloud service providers (CSPs) expected to see capital expenditure (capex) growth exceeding 50% year-on-year in 2025, compared to over 40% for global CSPs [3][9]. - The report highlights the shift from on-premise IT workloads to cloud solutions, with the global enterprise cloud computing market expected to increase from 18% of total IT spending in 2024 to 27% by 2028 [8][54]. Market Dynamics - The global public cloud computing market generated USD496.4 billion in 2023, with a year-on-year increase of 17%, and is expected to exceed USD1,200 billion by 2028 [43][44]. - China's cloud computing market revenue was CNY616.5 billion in 2023, a year-on-year increase of 35.5%, projected to reach CNY2.1 trillion by 2027 [44][51]. - The report emphasizes the importance of AI and cloud infrastructure investment, with significant growth expected in the IaaS, PaaS, and SaaS segments, which are projected to grow at CAGRs of 25%, 20%, and 18% respectively from 2023 to 2028 [45][51]. Key Players and Recommendations - Major players in the AI cloud and IDC sector include Alibaba, GDS, and Kingsoft Cloud, with Alibaba being the top pick in the AI Cloud sector and GDS in the IDC sector [4][14][13]. - The report notes that leading CSPs are expected to benefit from the ongoing AI investment cycle and the demand for AI computing power, particularly from large language models (LLMs) and generative AI applications [3][9][56]. Future Outlook - The report anticipates a multi-year growth cycle for the cloud and AI sectors, driven by technological advancements and increasing enterprise digital transformation initiatives [54][56]. - The shift towards high-margin business segments is highlighted as a key focus for China's CSPs, with expectations for improved margins through expansion into PaaS and SaaS [8][54].