Summary of Zhejiang Supcon Technology Co. (688777.SS) Conference Call Company Overview - **Company**: Zhejiang Supcon Technology Co. - **Ticker**: 688777.SS - **Market Cap**: Rmb42.1 billion / $5.9 billion - **Industry**: Process Automation (PA) and Industrial AI Key Takeaways Industry and Market Position - Supcon is the leading supplier of Distributed Control Systems (DCS) in China, holding the No.1 market share in 2024, competing with global peers like Emerson, Honeywell, and Yokogawa, as well as domestic competitors like Hollysys [6][7] - The company derives 57% of its total sales from the (petro)chemicals industry, which is currently facing a challenging capital expenditure (capex) outlook [6][7] Transition to Industrial AI - Supcon is actively transitioning to an industrial AI company, focusing on scaling up investments in AI, including R&D, product development, and sales [1][2] - The transition is expected to take 3 to 5 years, with a shift towards subscription-based software and AI products [2][6] Product Innovations - **TPT 2.0**: Launched in late August 2025, this SaaS platform has seen user growth of approximately 100 new users per day. It features a Mixture of Experts (MoE) architecture aimed at optimizing production processes and ensuring safety [4] - **Robotics Solutions**: Supcon showcased various robotics solutions, including inspection and quadruped robots. In the first half of 2025, robotics solutions generated Rmb110 million in sales, accounting for 3% of total sales, with a gross profit margin of 12% [4] Financial Performance and Outlook - The financial performance in the near term is expected to remain under pressure due to the weak domestic chemicals capex outlook [2][6] - The company plans to start charging subscription fees for TPT 2.0 after 2 to 3 months post-launch, although many customers are still accustomed to one-off sales models [4] Investment Thesis and Risks - The investment thesis holds a neutral view on Supcon's stock due to the domestic chemicals capex weakness, despite the company's strong market position and new initiatives [6][7] - The 12-month price target is set at Rmb40.4, representing a downside of 24.1% from the current price of Rmb53.20 [8] - Key risks include contributions from new initiatives, progress in overseas expansion, and potential gains in the domestic DCS market share [7] Financial Projections - Revenue projections for the upcoming years are as follows: - 2024: Rmb9,138.5 million - 2025E: Rmb8,404.9 million - 2026E: Rmb9,125.3 million - 2027E: Rmb10,128.3 million [8] Additional Insights - The company is increasing its allocation of resources towards AI applications, indicating a strategic pivot in its business model [1] - The robotics segment, while currently small, shows potential for growth as the company continues to innovate and expand its offerings [4] This summary encapsulates the critical insights from the conference call regarding Zhejiang Supcon Technology Co., highlighting its strategic direction, market challenges, and financial outlook.

Industrial AI Adoption & Market Opportunity - Industrial AI 正在经历极端的采用 [1] - NVIDIA 认为物理 AI 和工业 AI 是一个 10 万亿美元的行业 [2] - 工业 AI 不仅仅是数字孪生，它贯穿整个汽车生命周期，从前期设计协作到性能数字孪生 [4] - 工业 AI 被注入到数字孪生的创建中 [14] - 工业 AI 的创建从两个角度考虑：使用 Omniverse 创建工厂或仓库的虚拟版本，并使用 Cosmos 创建无限的变体 [15][16] Digital Twin Transformation - 行业正在从规划数字孪生转型到运营数字孪生，并注入 AI [5][8] - 运营数字孪生中，AI 可用于预测性维护，实时零件规划和机器人路径规划 [7] - 通过 AI 协同，用户可以通过提问来监控生产量，生产线问题等 [12][13] Mobility & Virtual Experience - 使用虚拟配置器查看不同的颜色和装饰组合 [9] - 能够实时体验车辆在不同环境条件下的性能，并最终通过 XR 体验坐在车辆中 [10] - 可以在 XR 中体验自动驾驶的未来 [10] AI-Powered Tools & Platforms - Metropolis 平台连接数千个摄像头，以帮助识别数字孪生如何实时运行 [22] - Isaac 和 Groot 平台用于机器人开发，帮助训练和测试 AMR，AGV，ARM 和人形机器人 [22] - Blueprint 旨在解决查找符合特定场景的数据，创建无限变体并基于数据训练模型的难题 [20][21] Real-World Applications & Partnerships - 已经与 BMW，Keon，Kanti，Rockwell Automation 和 Foxconn 合作实现了数字孪生 [5][25][26] - 与 Accenture 合作，将技术应用于 Keon 的仓库，实时感知数字孪生的每个操作 [24] - 设想与 Service Now 建立深度合作伙伴关系，在工厂车间触发实时警报，从而调试机器人或人员来处理事件 [19]

Core Insights - The article highlights the launch of TPT2, a significant upgrade of the time-series pre-trained transformer model by Zhongkong Technology, marking its strategic shift from an automation product supplier to an industrial AI platform provider [1][4][9] - TPT2 has received strong market interest, with 518 pre-orders and 112 transactions, indicating a robust demand for AI in industrial applications [1][4] - The model is designed to address core needs in process industries, showcasing the untapped potential of industrial AI [1][6] Group 1: Product and Technology - TPT2 is the world's first AI model deeply integrated with the first principles of process industries, utilizing a mixed expert model architecture [1][11] - The platform aims to transform the traditional project-based delivery model into a subscription service, enhancing long-term revenue stability [3][4] - TPT2's application has already been implemented in over 110 projects across various sectors, including petrochemicals and power [3][4] Group 2: Financial Performance - Zhongkong Technology reported a revenue of 9.139 billion yuan for 2024, a 6.02% increase year-on-year, with a net profit of 1.117 billion yuan, reflecting a 1.38% growth [6][7] - The industrial software revenue surged by 20.70% to 2.653 billion yuan, significantly outpacing traditional control business growth [7][8] - The gross margin for industrial software reached 54.03% in the first half of 2025, up from 31.67% in the same period of 2024, indicating effective conversion of AI technology into profitability [7][8] Group 3: Market and Strategic Positioning - The Chinese government's "Artificial Intelligence+" initiative emphasizes the integration of AI and industrial internet as a key driver for new industrialization [9][12] - Zhongkong Technology's TPT2 aligns with national strategies to cultivate intelligent native enterprises and achieve comprehensive intelligence [9][12] - The company is expanding globally, with successful bids in various international projects, showcasing its competitive edge in the global market [12][13] Group 4: Future Outlook - The industrial AI market is poised for significant growth, with TPT2 potentially unlocking a market space of 33 billion yuan annually [8][9] - Zhongkong Technology aims to transition from a product supplier to a platform-based company, enhancing its value proposition in the industrial AI sector [7][8] - The shift towards a subscription-based model is expected to drive sustainable business growth and reshape the economic landscape of industrial AI [3][4]

Core Insights - Zhongkong Technology has launched the TPT 2 time series model, which is based on the MoE (Mixture of Experts) framework, aimed at enhancing industrial intelligence [1] - The TPT 2 model enables closed-loop applications in various production processes through time series data algorithms, helping users ensure production safety and reduce energy and material consumption [1] - The platform shifts from a traditional "one scenario, one model" development approach to an efficient generation of intelligent agents applicable to various industrial setups through language interaction [1] Technology and Innovation - TPT 2 integrates multiple technological systems, advancing industrial applications from traditional tool-based assistants to intelligent agents capable of proactive anomaly detection, risk assessment, and autonomous decision-making [1] - The model replaces various industrial software functions such as simulation, control, optimization, prediction, evaluation, and statistics [1] Industry Collaboration - Zhongkong Technology has established the "Industrial AI Data Alliance" in collaboration with over 130 leading industry enterprises, design institutes, general contractors, and service providers [1] - The alliance aims to promote the scenario-based and large-scale application of industrial data, addressing industry challenges related to data immobility, underutilization, and insufficient collaboration [1]

So you and I have talked about the promise of industrial AI. We're coming off of blowout earnings from Palunteer today. Is the promise here. >> Promise is absolutely here.I mean for last uh you know I've been in this industry for more than three decades. One thing I hear now which I've never heard is customers are short of people and it sound uh you know they don't have skilled people to run their operations and they are looking for a substitute that what to do differently because you can't have more people ...

Core Viewpoint - Baker Hughes is positioning itself to benefit from the increasing interconnection between energy infrastructure, digital automation, and defense spending, particularly in areas like unmanned systems and energy resilience [1][5]. Group 1: Company Overview - Baker Hughes is primarily known for providing energy and oilfield services, making its earnings sensitive to oil and natural gas prices [2]. - The company is transforming into a technology-driven industrial player, focusing on digital infrastructure, industrial AI, and process optimization [3][9]. Group 2: Financial Performance - Baker Hughes reported revenue of $6.8 billion, with a 130-basis-point increase in operating margin, indicating strong financial performance [8]. - The Industrial & Energy Technology (IET) segment generated $2.8 billion in revenue, growing 13% year over year, driven by demand for electrification and automation tools [13]. Group 3: Market Position and Strategy - The U.S. defense budget for fiscal 2025 is projected to exceed $900 billion, with significant allocations towards unmanned systems and energy resilience, creating potential opportunities for Baker Hughes [4][5]. - Baker Hughes is pivoting towards technologies that support electrification and energy efficiency, which aligns with the U.S. Department of Defense's increasing focus on tech-forward industrial partners [10]. Group 4: Stock Performance and Valuation - Baker Hughes stock has seen a year-to-date increase of approximately 6.8%, with a notable jump of over 9.5% following its second-quarter earnings report [6]. - The stock is currently trading at a forward P/E ratio of 16.8x, which is reasonable relative to the sector average, and the company has approved a $3 billion share repurchase authorization [16].

Core Insights - VERSES AI Inc. has signed Algo8 as a Genius enterprise customer, with plans for Algo8 to become a certified Genius reseller [1][4] - Algo8 is focused on providing advanced predictive capabilities through its PlantBrain™ platform, targeting asset-heavy Fortune 500 and Global 2000 customers [2][6] - The collaboration aims to enhance industrial AI by enabling systems that can think, reason, and adapt in real time [4][7] Company Overview - VERSES AI Inc. specializes in cognitive computing and next-generation agentic software systems, with its flagship product, Genius, designed for reliable domain-specific predictions [5] - Algo8 is redefining industrial performance with its cognitive platform PlantBrain, which integrates advanced machine learning and AI-powered digital twins [6][7] Use Cases and Applications - Expected use cases for the integration of Genius into PlantBrain include predictive maintenance, demand forecasting, production planning, energy optimization, and building digital twins for manufacturing processes [3][4]

Core Insights - Cognex Corporation is launching OneVision™, a cloud-based platform aimed at transforming the development and scaling of AI-powered vision applications for manufacturers [1][3]. Group 1: Product Overview - OneVision simplifies application development by using AI to unify multiple tools, sites, and workflows, thereby enhancing the efficiency of the development process [2][4]. - The platform is designed to address common barriers to AI adoption in industrial settings, such as long development cycles, expensive infrastructure, lack of integration, and inconsistent performance across sites [3][7]. Group 2: Market Impact - OneVision expands Cognex's portfolio of machine vision products, enabling faster and more reliable solutions for complex vision tasks, which accelerates AI adoption in the manufacturing sector [4][5]. - The platform is currently available for select customers using In-Sight® 3800 and 8900 vision systems, with plans for broader release on additional products in early 2026 [4]. Group 3: Company Background - Cognex has over 40 years of experience in advanced machine vision technology, serving a diverse range of industries including automotive, consumer electronics, and packaged goods [5][6]. - The company focuses on making machine vision tools more accessible and easier to deploy, allowing factories and warehouses to improve quality and efficiency without requiring extensive technical expertise [6].

Group 1: Core AI Growth Drivers - Nvidia is positioned to potentially become the world's most valuable company, with a predicted market cap of $5 trillion driven by four key AI megatrends [1] - Reasoning AI is a significant breakthrough that enables AI agents to solve problems step by step, requiring more computing power than previous models [2][3] - Nvidia's technology, including Grace CPUs and Blackwell GPUs, is seen as ideal for supporting the demands of reasoning AI [4] Group 2: AI Diffusion - The rescinding of the AI diffusion rule by the Trump administration is expected to create opportunities for Nvidia by allowing broader access to AI technology globally [5][6] - Countries are increasingly recognizing AI as essential infrastructure, which will drive demand for Nvidia's products [6] Group 3: Enterprise AI - Enterprise AI is gaining traction as organizations integrate AI to enhance business processes, closely linked to reasoning AI [8] - Nvidia's comprehensive approach to enterprise IT, including compute, storage, and networking, positions the company for strong revenue growth in this sector [9] Group 4: Industrial AI - Industrial AI focuses on applying AI to improve efficiency in manufacturing processes, with a vision that many factories will incorporate AI systems [10][11] - Nvidia's Omniverse product supports manufacturers in creating simulations and training autonomous systems, indicating a significant growth opportunity in industrial AI [11]

Financial Data and Key Metrics Changes - NVIDIA reported revenue of $44 billion for Q1 2026, a 69% increase year-over-year, exceeding expectations despite a challenging operating environment [6] - Data center revenue reached $39 billion, growing 73% year-on-year [6] - GAAP gross margins were 60.561%, while non-GAAP gross margins would have been 71.3% excluding a $4.5 billion charge related to inventory write-downs [31][32] Business Line Data and Key Metrics Changes - Data center revenue was significantly impacted by new export controls, with $4.6 billion recognized prior to the controls and a $4.5 billion charge for inventory write-downs [7][31] - Gaming revenue reached a record $3.8 billion, increasing 48% sequentially and 42% year-on-year, driven by strong adoption of Blackwell architecture [22][23] - Pro Visualization revenue was flat sequentially at $5.9 billion but up 19% year-on-year [26] - Automotive revenue was $567 million, down 1% sequentially but up 72% year-on-year, driven by self-driving technology and demand for new energy vehicles [28] Market Data and Key Metrics Changes - China represented a smaller percentage of data center revenue due to export licensing controls, with expectations of a meaningful decrease in Q2 [21] - Singapore accounted for nearly 20% of Q1 build revenue, primarily for orders from US-based customers [22] Company Strategy and Development Direction - NVIDIA is focusing on AI factory deployments, with nearly 100 AI factories in progress, doubling year-over-year [13][14] - The company is committed to a product roadmap extending through 2028, with a focus on enhancing AI capabilities and infrastructure [11][12] - The introduction of new products like GB 300 systems is aimed at maintaining high yields and seamless transitions for customers [11] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about losing access to the China AI accelerator market, which could have a material adverse impact on business [9] - The company anticipates continued growth in AI demand, particularly in reasoning AI, which is driving significant increases in token generation [12][62] - For Q2, total revenue is expected to be around $45 billion, with modest sequential growth across platforms despite the loss of H20 revenue [32][33] Other Important Information - NVIDIA returned a record $14.3 billion to shareholders through share repurchases and dividends [32] - The company is exploring limited options to supply data center products compliant with new export control rules [8] Q&A Session Summary Question: How much of the inference demand is NVIDIA able to serve? - Jensen Huang stated that NVIDIA aims to serve all inference demand and is on track to meet most of it, highlighting the capabilities of the Grace Blackwell NVLink 72 for reasoning AI [53][54] Question: What is the impact of the China export controls on future revenue? - Colette Kress clarified that the company recognized $4.6 billion in H20 revenue in Q1 but expects a significant decline in China data center revenue in Q2 due to export controls [60][61] Question: What are the drivers of growth for the AI infrastructure? - Jensen Huang identified four positive surprises driving growth: increased demand for reasoning AI, the rescinding of the AI diffusion rule, the rise of enterprise AI, and the emergence of industrial AI [82][84]