Orient Securities·2025-05-22 13:30Investment Rating - The report maintains a "Buy" rating for key companies in the AI sector, including Alibaba-W, Kuaishou-W, Tencent Holdings, and Baidu Group-SW [3][8][11]. Core Insights - The AI sector is experiencing a new cycle driven by advancements in computing power, algorithms, and applications, with a strong recommendation to increase exposure to the Hong Kong internet sector [3][8]. - Major companies like Alibaba and Tencent continue to invest heavily in AI, with Alibaba's Q1 2025 capital expenditure reaching 24.61 billion CNY, a year-on-year increase of 120.7%, and Tencent's capital expenditure at 27.48 billion CNY, up 91.4% year-on-year [11][12][17]. Summary by Sections AI Industry Dynamics - The report highlights the ongoing high investment in AI both domestically and internationally, with major cloud service providers maintaining robust capital expenditures [8][17]. - Alibaba's new model, Wan2.1-VACE, can perform multiple video generation tasks, while Tencent's mixed image model achieves image generation speeds in milliseconds [20][23]. Investment Recommendations - The report suggests increasing positions in Alibaba-W, Kuaishou-W, Tencent Holdings, and Baidu Group-SW, all of which are positioned well within the AI ecosystem [3][8]. - The expected growth in capital expenditures from these companies is anticipated to drive further advancements in AI applications and infrastructure [11][12]. AI Model Developments - New multi-modal models have been released by Alibaba, Tencent, and ByteDance, showcasing significant advancements in capabilities and performance metrics [20][23][31]. - The DeepSeek model has introduced innovative techniques to reduce training costs and improve efficiency, which could set a new standard in AI model training [32][34]. AI Applications - Baidu has launched its DeepSearch feature, which utilizes a vast content library to enhance search capabilities, offering a competitive edge over international counterparts [36][43]. - ByteDance's DBCopilot aims to streamline database management through AI, significantly improving operational efficiency [43]. Market Trends - The report tracks web traffic for AI applications, noting that DeepSeek leads in domestic web traffic, while ChatGPT remains dominant globally [44][46]. - The overall trend indicates a growing interest and usage of AI applications, with significant engagement metrics reported [44][46].