Core Insights - The IDC report indicates that the volume of large model calls on China's public cloud is expected to reach 114.2 trillion tokens in 2024, with a significant growth trend starting in the second half of 2024 due to rapid advancements in cloud vendors' large model capabilities and a price reduction strategy for model calls [1][5][6] Group 1: Market Share and Growth - ByteDance's Volcano Engine leads the market with a 46.4% share, followed by Baidu Smart Cloud and Alibaba Cloud, each holding 19.3% [4][6] - The call volume for large models has increased nearly tenfold in six months, from an average of 96.3 billion tokens in June to 952.2 billion tokens in December 2024 [5][6] - The rapid growth in model calls is attributed to the enhancement of large model capabilities and the reduction in calling costs by major cloud vendors [5][6] Group 2: Industry Applications and Trends - The report highlights that 80% of enterprises plan to adopt more generative AI use cases in the next 18 months, indicating a strong growth trajectory for AI applications across various industries [10][12] - The main expected benefits of generative AI for enterprises include improved operational efficiency and increased profits and revenue [12] - The public cloud large model services are expected to see diverse applications in sectors such as e-commerce, automotive, and finance, with significant growth anticipated in image and video model calls starting in late 2024 [12][14] Group 3: Future Outlook and Recommendations - The report suggests that 2025 will be a pivotal year for AI application explosion, with the infrastructure for generative AI expected to reach 35.6 billion RMB and the software market around 4.9 billion RMB [16] - Industry consensus emphasizes the need for a "public cloud first" development strategy to avoid fragmentation and promote effective data sharing [15][16] - The integration of models like DeepSeek into various cloud platforms is expected to enhance awareness and deployment of optimized large models, benefiting the cloud industry significantly [14][15]

Core Insights - The IDC report indicates that the volume of large model calls in China's public cloud is expected to reach 114.2 trillion tokens in 2024, with significant growth anticipated starting in the second half of 2024 due to rapid advancements in cloud vendors' large model capabilities and a price reduction trend in model calls [1][6][7]. Market Share Analysis - ByteDance's Volcano Engine leads the market with a 46.4% share, followed by Baidu Smart Cloud and Alibaba Cloud, each holding 19.3% [4][8]. - The overall market share of other vendors, including Tencent Cloud and China Mobile, accounts for 15% [4][8]. Growth Dynamics - The report highlights a nearly tenfold increase in call volume from June to December 2024, with daily calls rising from 96.3 billion tokens to 952.2 billion tokens [6][7]. - The rapid growth in large model calls is attributed to the enhancement of cloud vendors' model capabilities and the implementation of price reduction strategies [7][8]. Industry Applications - AI applications are expanding across various sectors, with 80% of enterprises planning to adopt more generative AI use cases in the next 18 months [12][13]. - The anticipated primary benefits for enterprises include improved operational efficiency and increased profits and revenue [15]. Future Trends - The report predicts that by 2025, the infrastructure for generative AI in China will reach 35.6 billion RMB, with the software market size expected to be around 4.9 billion RMB [20]. - The growth of image, video, and multimodal models is expected to drive significant increases in application scenarios starting in late 2024 [15]. Competitive Landscape - The competitive landscape is shifting towards a few leading large models, with the market increasingly dominated by top-tier players [11]. - The emergence of the DeepSeek model has significantly raised awareness and accelerated the deployment of large models across industries [18][19]. Cloud Industry Benefits - The public cloud sector is positioned to be the biggest beneficiary of the AI wave, with companies like Volcano Engine rapidly gaining market share despite being relatively new [19]. - The report emphasizes the need for a "public cloud first" strategy to avoid fragmentation and inefficiencies in AI deployment [20].

Investment Rating - The report maintains a positive outlook on the AI industry and recommends a strategic focus on AI software applications and related sectors [1][2][3] Core Insights - The report emphasizes the ongoing transformation driven by AI technology, highlighting the resurgence of market interest in AI themes and the potential for investment in the AI software application sector [1] - It identifies opportunities in the domestic AI computing power supply chain, particularly in cloud service providers, computing power leasing, and various hardware components [2] - The humanoid robot industry is experiencing sustained interest, with a trend of expanding from structural components to electronic components, indicating potential for collaborative development within the electronics industry [3] - The report also notes the value reassessment in the Hong Kong internet sector, driven by advancements in large model technology and the open-source movement [3] - The consumer electronics panel supply-demand dynamics are improving, with signs of price increases due to rising demand and supply-side adjustments [6] Summary by Sections AI Industry - Continued optimism regarding the growth potential of the AI industry, particularly in software applications and computing power supply chains [1][2] - Key companies mentioned include: 用友网络, 金蝶国际, 汉得信息, and others [1] Humanoid Robots - The humanoid robot sector is expanding, with electronic architecture similar to that of intelligent driving systems [3] - Relevant companies include: 峰岹科技, 思瑞浦, and others [3] Internet Sector - The report highlights the ongoing value reassessment in the Hong Kong internet sector, particularly for Tencent Holdings due to its diverse AI application scenarios [3] Consumer Electronics - The report suggests investment opportunities in the panel industry, with companies like TCL 科技, 彩虹股份, and 京东方 being highlighted [6]

Core Viewpoint - The announcement by Lu Chen Technology to suspend DeepSeek API services is primarily driven by cost considerations, despite DeepSeek's high theoretical profit margin of 545% [2][4][5]. Group 1: Company Actions and Decisions - Lu Chen Technology is the first company to officially announce the suspension of DeepSeek API services, coinciding with DeepSeek's announcement of a 545% theoretical profit margin [2][5]. - The decision to halt the DeepSeek API service was made without public explanation from Lu Chen Technology, but internal sources indicate that cost issues are the main reason [4][9]. - The official communication from Lu Chen Technology to users stated that the API service would be suspended due to business adjustments, allowing users to request refunds for unused balances [9]. Group 2: Cost Analysis and Industry Implications - The cost of providing stable access to DeepSeek services is significantly high, requiring substantial redundant computing resources that smaller cloud service providers like Lu Chen Technology cannot afford [10]. - DeepSeek's recent open-sourcing of many inference components has made it challenging for third-party MaaS providers to match official costs, leading to a narrowing of profit margins for these companies [10]. - The competitive landscape for smaller MaaS providers is deteriorating as DeepSeek's open-source initiatives disrupt existing business models, making it difficult for them to maintain a competitive edge [10]. Group 3: Founder’s Perspective - Founder You Yang of Lu Chen Technology has publicly expressed concerns about DeepSeek's cost structure, arguing that the reported training costs for models are misleading and that the actual costs for sustained operations are much higher [6][8]. - You Yang's analysis suggests that the profitability of third-party MaaS providers is questionable, as they often operate at a loss while trying to offer DeepSeek services [9].

Investment Rating - The report assigns a "Buy" rating for Alibaba-SW (09988.HK) with a target price of 176.66 HKD, compared to the current price of 130.40 HKD [2]. Core Insights - The report emphasizes the recovery of Alibaba Cloud in the context of a new phase of AI growth in China, highlighting its leading position in the public cloud market and its strategic advantages [5][10]. - The report discusses the shift in enterprise demand towards integrated IaaS+PaaS solutions driven by the AI wave, suggesting that this trend will enhance the overall cloud market growth [9][20]. Summary by Sections Domestic Cloud Market Landscape - The public cloud market in China is experiencing a second growth cycle driven by IaaS+PaaS integration, with public cloud revenue accounting for 74% of the total cloud market in 2023, growing by 40% year-on-year [5][19]. - IaaS remains the largest segment, while PaaS is the fastest-growing, indicating a shift in enterprise preferences towards more comprehensive cloud solutions [19][20]. Alibaba Cloud's Competitive Position - Alibaba Cloud is the leading public cloud service provider in China, with significant market shares in both IaaS and PaaS, and ranks second globally in terms of product and strategic capabilities [10][38]. - The company has built a deep competitive moat through its self-developed technology stack and long-term strategic investments, making it a key player in the "AI + Cloud" development landscape [10][49]. Financial Performance and Projections - The report forecasts Alibaba's total revenue to reach 941.17 billion CNY in 2024, with a year-on-year growth rate of 8.3%, and adjusted net profit expected to grow by 11.4% to 157.48 billion CNY [6]. - The adjusted EBITA margin for Alibaba Cloud is showing a quarterly improvement, indicating a positive trend in profitability as AI-related revenues accelerate [5][11]. Investment Logic - The report suggests that the core of Alibaba's valuation recovery is centered around the re-evaluation of its cloud business, with future sustainability dependent on the performance of its core e-commerce business and the growth of AI-related cloud services [11][12]. - The SOTP valuation method indicates a target market value of 30,558 billion CNY for FY26, with a corresponding PE ratio of 14/12 times for FY26-27 adjusted net profit [11].

Core Viewpoint - The article discusses the recent decision by Lu Chen Technology to suspend its DeepSeek API service, primarily due to cost considerations, despite DeepSeek's high theoretical profit margin of 545% [1][2][3]. Group 1: Cost Considerations - Lu Chen Technology's decision to halt DeepSeek API access is largely attributed to the high costs associated with providing stable service, which smaller MaaS providers struggle to manage compared to larger cloud companies [6][9]. - The theoretical profit margin of 545% reported by DeepSeek is based on a scenario where user demand is maximized, which is not typical for standard MaaS products that require significantly more resources to maintain stable output [3][4]. - The cost of providing DeepSeek services is exacerbated by the need for redundant computing resources to handle unpredictable user demand, leading to higher operational costs for smaller providers [9][10]. Group 2: Industry Impact - The suspension of DeepSeek API services by Lu Chen Technology reflects broader challenges faced by smaller MaaS companies in the wake of DeepSeek's competitive pricing and open-source initiatives, which threaten their business models [10]. - As DeepSeek continues to open-source its technology, many third-party MaaS providers are finding it increasingly difficult to maintain a competitive edge, leading to a potential disruption in the industry [10]. - The article highlights that numerous companies across various sectors, including technology, finance, and government, have integrated DeepSeek, indicating its widespread influence and the potential risks for smaller players in the market [8].