Core Insights - Hon Hai's chairman Liu Yangwei stated that electric vehicles will be the third growth engine for the company, following information communication (ICT) and AI products, with expectations for 2025 revenue to exceed NT$7 trillion [1] - The company aims to maintain its leading position in the ICT sector, with a global electronic manufacturing market share of 44.2% in 2024, and an AI server market share exceeding 40% [1] - Hon Hai's revenue from consumer smart products has grown by 20% over the past five years, while cloud network products have seen a 60% increase [1] Group 1 - Hon Hai plans to accelerate edge computing applications in AI, which is seen as the second growth engine, contributing significantly to revenue through AI servers and three major smart platforms [1][2] - The company is establishing a data-related industrial chain in multiple countries and integrating AI into corporate governance, focusing on generative AI (GAI) as the core of its software platforms [2] - Hon Hai aims to become one of the top three contract design and manufacturing service (CDMS) providers for electric vehicles, with ongoing discussions with multiple Japanese automakers [2] Group 2 - The company showcased several electric vehicles at the shareholder meeting and reported "exciting progress" in collaboration with Mitsubishi Motors, indicating recognition from traditional automakers [2] - Hon Hai's AI server revenue is projected to exceed NT$1 trillion annually, leveraging a digital twin model to enhance factory planning and operational efficiency [2] - The company is actively pursuing the U.S. market for its electric vehicles, with plans to launch a U.S. version of Model C in the fourth quarter, while monitoring tariff implications [2]

Core Viewpoint - Morgan Stanley believes that China's Generative AI (GAI) development is at the beginning of its second phase, with Alibaba positioned as a key player in the Infrastructure as a Service (IAAS) value chain, likely to outperform peers in this phase and potentially benefit from the third phase of applications [2][3]. Phase Summaries - **Phase 1**: Development of large language models (LLMs), focusing on building and optimizing LLMs [5]. - **Phase 2**: Application of GAI in existing applications and services, currently at the beginning stage where companies are exploring value creation models [6]. - **Phase 3**: Surge in internet service consumption as GAI applications become widespread, leading to significant financial gains for internet operators [7]. - **Phase 4**: Emergence of native GAI "killer applications" that will fundamentally change market competition and introduce new business models [8]. Infrastructure as a Service (IAAS) Insights - The report highlights that companies in the IAAS value chain will perform well in the second phase of GAI development, with revenue expectations likely to be positively revised. Alibaba is identified as the most promising stock in this area [11][12]. - Tencent, while holding a significant market share in China's IAAS, is viewed more as a beneficiary of AI applications rather than a primary player in the IAAS space [12][13]. Other Key Players - **Kuaishou**: Identified as an undervalued AI beneficiary, with expectations that AI will significantly enhance user engagement and monetization capabilities. The AI video/image generator Kling is projected to have over 6 million users by December 2024, indicating substantial monetization potential in various commercial verticals [15]. - **Baidu**: Positioned as both an IAAS cloud value chain player and a potential GAI application beneficiary. The company's stock outlook is contingent on the transformation of its core advertising and cloud business narratives [16].