Investment Rating - The industry view is rated as In-Line [8] Core Insights - The report maintains a conservative stance on cloud semiconductors in the near term, with expectations that the cycle could trough in the second half of 2025 [2][6] - A recent CIO survey indicates potential downside for China cloud capital expenditures (capex) in 2H25, with data center build-out being a top spending priority but also the most likely to face budget cuts [3][11][15] - Strong orders for non-AI cloud semiconductors are anticipated into 2Q25, with Montage Technology showing sequential revenue growth [4][6] - AI cloud semiconductors may experience a slowdown in specification migration, but demand remains strong for inference applications, particularly for Nvidia [5][10] Summary by Sections Cloud Semiconductors - The report suggests that the cloud semiconductor market is heading into a trough in 2H25, with a conservative outlook maintained for the near term [2][10] - The top four cloud service providers (CSPs) reported a 64% year-over-year increase in capex in 1Q25, slightly down from 68% [6][30] CIO Survey Insights - The CIO survey indicates that data center build-out is a top priority for spending in 2025, but it is also the category most vulnerable to cuts, with a 19% response rate indicating it is likely to be cut, increasing to 29% after the announcement of reciprocal tariffs [3][18] - The defensiveness of data center build-out has decreased significantly post-tariff announcements [18] Company-Specific Insights - Montage Technology's price target has been adjusted from RMB 90.00 to RMB 88.00, reflecting earnings estimate cuts due to uncertainties in the market [8][45] - The report anticipates a 38% year-over-year growth in global cloud capex for 2025, up from a previous forecast of 31%, indicating strong investment trends among major cloud players [19][24] Financial Projections - Earnings estimates for Montage have been revised downwards, with a 2% cut for 2025 and a 5% cut for 2026, reflecting risks associated with potential cuts in data center projects [45][46] - The financial summary for Montage indicates projected net sales of RMB 5.601 billion for 2025, with a gross profit margin of 60.6% [41][46]