基模领先，组织财务双保障，占领AI时代高地

Investment Rating - The report maintains a "Positive" investment rating for the media industry in China [5] Core Insights - The domestic AI demand is accelerating, with the AI cycle divided into three phases: computing/cloud, ToB vertical applications, and C-end application scenarios. The focus is currently on the first and second phases, suggesting an increase in allocation to Hong Kong's internet sector [3][12] - ByteDance is positioned as a leader in AI foundational architecture, with significant investments in long-term AGI research and a strong financial backing, achieving a revenue of $155 billion in 2024, with an EBITDA of approximately $52 billion [8][13][50] - The report highlights the optimistic outlook for the AI industry, driven by increasing token consumption and the ongoing decline in model costs, which is expected to foster demand growth [17][18] Summary by Sections Section 1: Basic Research - ByteDance's large model capabilities are in the domestic top tier, with the gap to overseas models reduced to within three months. The company has made significant strides in both language and multimodal models [21][25] - The organizational structure supports long-term AGI research, with a high-density talent pool and a competitive internal mechanism driving rapid advancements in AI model capabilities [30][31] Section 2: Volcano Engine - The Volcano Engine is positioned to benefit from the performance of foundational models, with a revenue target of doubling to $125 billion in 2025 [8][26] Section 3: Investment Recommendations - The report recommends increasing exposure to the Hong Kong internet sector, focusing on companies like Alibaba, ByteDance, and Tencent, which are well-positioned in the AI landscape [3][12]