Summary of Conference Call on AI Acceleration and Related Technologies Industry Overview - The conference call focused on the AI industry, particularly the advancements in optical modules, liquid cooling technology, and domestic computing power in China. The discussion highlighted the increasing demand for AI-related hardware and the implications for various companies involved in the supply chain. Key Points and Arguments AI Industry Acceleration - The global AI industry chain is experiencing rapid acceleration, with all segments speeding up deliveries and increasing orders. Google has raised its 2026 TPU demand for the fifth time from 4 million to 4.9 million units, indicating a significant increase in demand for 1.6T optical modules, with estimates ranging from 16 million to 30 million units for 2026 [2][3]. Demand for Optical Modules - Google’s increased TPU demand directly correlates with a rise in the need for 1.6T optical modules. Leading companies in the optical module sector, such as Zhongji Xuchuang and Xinyi Technology, are expected to benefit from this trend [3]. Liquid Cooling Technology - Liquid cooling technology is being rapidly adopted in AI computing. Google’s V7 will fully utilize liquid cooling, while previous versions (V5 and V6) still used air cooling. The collaboration between Invec and Google on a universal CDO liquid cooling solution is noteworthy, as is the push from Meta and OpenAI to implement liquid cooling [4]. Developments in Optical Communication - The optical communication sector is focusing on four main areas: 1. 1.6T optical modules (Zhongji Xuchuang, Xinyi Technology) 2. Optical devices (Changxin Bochuang, Taichen Optics, Changfei Fiber) 3. Optical chips (Yuanjie Technology, Shijia Optics) 4. OCS switches (Tengjing Technology, Guangku Technology) These components are crucial to Google's supply chain [5]. Domestic Computing Power in China - Positive signals are emerging in China's computing power sector, with a major company initiating a large tender project. Additionally, favorable outcomes from US-China trade negotiations may further promote domestic computing power development, presenting opportunities for related companies [6][8]. Server Power Supply Market - The server power supply market is experiencing rapid growth, with Eulantong being a key player in Google's supply chain. Concerns over rising storage prices and potential shortages may lead to supply-demand imbalances, highlighting market opportunities [7]. Trends in Domestic AI Investment - Domestic AI investment is expected to accelerate significantly in 2026, with companies like Cambricon and Haiguang gradually shipping domestic computing cards. The anticipated increase in domestic AI investment may surpass overseas levels, positively impacting the domestic AI supply chain [8][10]. Supernode Technology - Supernode technology is projected to see explosive growth in 2026, with companies like Cambricon and ZTE accelerating their efforts in this area. Opportunities include 51.2T switching chips, machine manufacturing, 800G optical module upgrades, liquid cooling technology, copper connections, and high-power server power supplies [11]. AIDC Sector Development - The AIDC (Artificial Intelligence Data Center) sector's growth is contingent on improved chip supply. Although tender progress is accelerating, the overall pace remains slow. Positive developments in US-China trade negotiations are expected to enhance the AIDC sector's fundamentals, including data center construction and power supply equipment [12]. Investment Opportunities - Current market conditions favor investments in three main areas: upgrading optical modules to 800G, liquid cooling technology, and domestic computing power. The acceleration of capital expenditures by major players globally presents significant investment opportunities. Any stock price corrections may provide favorable entry points for investors [13]. Additional Important Insights - The conference highlighted the interconnectedness of various technologies and companies within the AI ecosystem, emphasizing the importance of collaboration and innovation in driving growth across the industry. The focus on domestic capabilities in China reflects a strategic shift towards self-sufficiency in AI technologies.

Investment Rating - The report maintains an "Outperform the Market" rating for the communication industry [6][68]. Core Views - The global computing power remains in a high prosperity phase, with significant developments in China's commercial aerospace and AI infrastructure [1][3][5]. - The report highlights the rapid growth of domestic optical module companies and the continuous increase in demand for data communication products, indicating a sustained high industry prosperity [3][22][30]. Summary by Sections Industry News Tracking - The successful completion of the first phase of the Zhuque-3 rocket flight test marks a significant advancement in China's commercial aerospace sector [2][13]. - The Chinese government emphasizes the importance of artificial intelligence, aiming to enhance innovation ecosystems and accelerate AI development [17][19]. - Domestic optical module companies report significant year-on-year profit growth, validating the high prosperity of the data communication sector [22][24]. - The optical cable export data shows a quarter-on-quarter growth of 9.04%, reflecting the ongoing industry prosperity [30][31]. Market Performance Review - The communication index increased by 11.55%, outperforming the Shanghai and Shenzhen 300 index, which rose by 3.24% [4][55]. - The optical module, industrial communication, and optical fiber cable sectors performed particularly well [55]. Investment Recommendations - Continuous attention is recommended for the development of AI computing power infrastructure, with specific focus on optical devices and modules, communication equipment, and liquid cooling technologies [5][65]. - The three major telecom operators are highlighted as important assets for dividend allocation, with stable operations and increasing dividend ratios [5][65]. Key Company Earnings Forecast and Investment Ratings - China Mobile, Zhongji Xuchuang, and ZTE Corporation are rated as "Outperform the Market" with projected earnings per share (EPS) growth for 2025 and 2026 [6][62].

Group 1 - The long-term slow bull market pattern remains unchanged, with the Shanghai Composite Index being the most important and strongest index currently [1] - Recent two weeks have seen a 10-day cycle structure repair in various sectors, indicating a strengthening trend, although there is still pressure on trading volume [1] - Quality stocks that have undergone adjustments over the past two weeks present good bottom-fishing opportunities for investors [1] Group 2 - Technology stocks are expected to continue their upward momentum, with various segments reaching new highs, including AI hardware and solid-state batteries [1] - The liquid cooling industry is anticipated to perform well due to clear growth rates and market size expectations [1] - The storage chip sector has gained significant attention due to rapid AI demand growth, driving continuous price increases in non-products [1]

Core Viewpoint - The establishment of a wholly-owned subsidiary in the United States by the company aims to meet the order demands related to computing power in North America, enhancing its overseas operational platform and service efficiency [2] Group 1 - The company has set up a wholly-owned subsidiary in the United States to handle orders related to computing power in the North American region [2] - This move is intended to facilitate the expansion into the North American and global markets [2] - The establishment of the subsidiary will improve the company's responsiveness and support capabilities for overseas projects [2] Group 2 - The company addressed inquiries regarding its liquid cooling products and their availability for U.S. customers, indicating that details should be confirmed through official announcements [2] - There are rumors about a collaboration with Luxshare Precision for supplying liquid cooling products to NVIDIA, but the company advises to refer to official announcements for confirmation [2]

Market Performance - The A-share market saw a collective rise in the three major indices, with the Shanghai Composite Index recovering the 3900-point mark, closing up 1.36% [2] - The total trading volume in the Shanghai and Shenzhen markets approached 1.9 trillion yuan, an increase of over 100 billion yuan compared to the previous day [3] - Over 4600 stocks rose throughout the day, with nearly 100 stocks hitting the daily limit [3] Sector Performance - The mining, engineering machinery, electronic components, shipbuilding, real estate development, consumer electronics, non-metallic materials, and trade sectors led the gains, while coal, gas, and precious metals sectors declined [3] - The technology narrative remains a consistent theme in the current market rally, influenced by Apple's stock performance and the strong sales of the iPhone 17 series, which saw a 14% increase in sales compared to the iPhone 16 during the same period [5] Stock Highlights - Stocks related to the consumer electronics supply chain surged, with companies like Fuliwang rising over 12% and Luxshare Precision hitting the daily limit [5] - In the computing and liquid cooling sectors, stocks such as Yuanjie Technology and Zhongfu Circuit saw significant gains, with Yuanjie hitting a 20% limit up [5] Market Trends - The performance of large-cap stocks, as indicated by the Shanghai 50 and CSI 300 indices, rose by 1.09% and 1.53% respectively, while small-cap stocks, represented by the CSI 1000 and CSI 2000 indices, increased by 1.45% and 1.93% [8] - Tianfeng Securities noted that historically, small-cap stocks tend to outperform in the fourth quarter, suggesting a potential shift in market style towards a more balanced phase [10] Broker Performance - The recent focus on the reform of state-owned assets in Hubei province led to significant gains for local brokerage firms, with Tianfeng Securities rising by 5.70% and Changjiang Securities by 2.67% [11] - Guojin Securities highlighted the high probability of continued strong performance in the brokerage sector, with current valuations being attractive [12]

Core Viewpoint - The company Invec reported a significant increase in stock price, but its profit growth has not kept pace, leading to a high dynamic PE ratio of 173.6 times, raising concerns about future valuation sustainability [2][7]. Financial Performance - For the first three quarters of 2025, Invec achieved revenue of 4.026 billion yuan, a year-on-year increase of 40.19%, primarily driven by increased sales of temperature control energy-saving products [3][4]. - The net profit attributable to shareholders for the same period was 399 million yuan, reflecting a growth of 13.13%, while the net profit excluding non-recurring gains was 384 million yuan, up 14.76% [3][4]. - In Q3 2025, the company reported revenue of 1.453 billion yuan, a year-on-year increase of 25.34%, with a net profit of 183 million yuan, up 8.35% [3][4]. Stock Performance - Invec's stock price surged approximately 169.20% in Q3 2025, with the highest increase exceeding 200% during the quarter [5][6]. - Despite the stock price increase, the company's profit growth has lagged behind revenue growth, raising concerns about sustainability [6]. Shareholder Activity - Significant reductions in holdings were observed from major shareholders, including a reduction of over 8.5 million shares by the social security fund and a more than 50% reduction in holdings by the Stock Connect [11][12]. - New shareholders entered the top ten list, indicating a shift in investor sentiment [13]. Valuation Metrics - The current dynamic PE ratio stands at 173.6 times, with a rolling PE (ttm) of 151 times, indicating a high valuation relative to earnings [2][7].

Core Insights - The Ministry of Industry and Information Technology and six other departments have issued a plan to promote service-oriented manufacturing innovation from 2025 to 2028, emphasizing the construction of new information infrastructure and the integration of "5G + industrial internet" [1] - Liquid cooling technology is identified as a key component of AI computing infrastructure, transitioning from an optional technology to a necessary configuration, with significant growth expected in the industry [1][2] Industry Growth and Market Potential - The demand for high-performance computing in AI has surged, leading to rapid growth in the liquid cooling market, with China's liquid cooling server market projected to reach $2.37 billion in 2024, a 67% increase from 2023 [2] - By 2029, the market size for liquid cooling servers in China is expected to reach $16.2 billion, indicating a strong upward trend [2] Application and Commercialization - Liquid cooling technology is increasingly applied in high-performance computing, AI training, and large-scale data centers, particularly in AI servers with high-power GPUs and CPUs [3] - The commercial model for the liquid cooling industry includes hardware sales and service-oriented approaches, with significant procurement concentrated in the internet, telecommunications, and government sectors [3] Industry Chain Development - The liquid cooling industry chain has formed a complete matrix covering server manufacturing, temperature control in data centers, core components, and cooling materials, allowing companies to build differentiated competitive advantages [4] - Companies like Guangdong Liying Intelligent Manufacturing and Shenzhen New Zobang Technology are actively expanding their core business in response to favorable policies and increasing AI computing demands [4][5] Technological Advancements - Liquid cooling solutions can reduce energy consumption by 50% and achieve a Power Usage Effectiveness (PUE) of below 1.05, showcasing their efficiency [5] - Industry players are focusing on high-barrier segments, enhancing the purity of fluorinated liquids, and improving microchannel design and sealing technology to boost product competitiveness [5]

Key Points - Multiple listed companies disclosed their latest developments in robotics and consumer electronics through various channels on October 9 [1] Robotics - Taotao Automotive is progressing with its overseas sales collaboration with Yushu Technology in the robotics sector [1] Consumer Electronics - Kaisheng Technology's UTG products are primarily used in foldable smartphones and other new display technologies [1] Optical Communication - Jiulian Technology has established sales for its 100G, 200G, and 400G optical module products [1] Liquid Cooling - Feilong Co., Ltd. has four production lines in the liquid cooling sector, with an expected annual capacity of approximately 1.2 million units [1] Other Developments - China New Group has cumulatively committed to 52 external market-oriented funds and directly invested in 42 technology projects [1] - Aikelan is conducting multiple preliminary research and development activities in response to the National VII emission standards [1] - Tongda Co., Ltd.'s subsidiary Chengdu Hangfei currently has a full order book and sufficient capacity utilization [1] - Shuanghui Development is collaborating with Zhongyu Pet Food on fresh meat supply and equity investment [1] - Hengji Daxin reported that Typhoon "Hagupit" did not significantly impact production operations in the Zhuhai storage area [1]

Group 1 - The core viewpoint of the report highlights the rapid growth of the liquid cooling server market in China, with a projected market size of $2.37 billion in 2024 and a compound annual growth rate (CAGR) of 46.8% from 2024 to 2029, reaching $16.2 billion by 2029 [1][2] - The data center cooling market is also expanding, with a current size of $7.67 billion in 2023, expected to grow to $16.87 billion by 2028, while the global liquid cooling market is anticipated to increase from $1 billion in 2023 to approximately $5.6 billion by 2028 [1][2] Group 2 - The development of liquid cooling technology is driven by the increasing power density of data center cabinets, which generates more heat and necessitates advanced cooling solutions. Liquid cooling offers advantages such as lower energy consumption, higher cooling efficiency, lower noise, and reduced total cost of ownership (TCO) compared to traditional air cooling [2] - Liquid cooling technology is categorized into contact and non-contact types, with both the Chinese and global markets experiencing high double-digit growth rates [2] Group 3 - Single-phase cold plate liquid cooling is currently the mainstream application, requiring minimal modifications to communication equipment and infrastructure, and is the most mature technology in the industry. The cost of liquid cooling in data centers is approximately 11,818 yuan per kW, saving an average of about 1.8396 million yuan annually compared to air cooling [3] - Immersion liquid cooling is energy-efficient, compact, and highly reliable, with the market size expected to grow from $12 million in 2024 to $486 million by 2029. The cooling liquids used typically include fluorinated liquids, and the exit of 3M from PFAS production may benefit domestic companies in this sector [3] Group 4 - Companies to watch in this sector include Juhua Co., Yonghe Co., New Zobang, Huayi Group, 8 Billion Space, and Runhe Materials [4]

Core Viewpoint - Lin Yuan, a veteran value investor, has historically avoided technology stocks, focusing instead on investments with high certainty and long-term holding strategies. Recently, he passively acquired some tech stocks due to market requirements, expressing discomfort with this shift in strategy [2][3]. Group 1: Investment Philosophy - Lin Yuan's investment philosophy emphasizes certainty and long-term holding, which has led to significant past successes, such as tripling his investment in Ninghu Expressway and achieving financial freedom through Guizhou Moutai [2]. - Despite the booming tech market, Lin Yuan remains steadfast in his avoidance of technology stocks, citing his past experiences in the tech industry as a reason for his cautious approach [2][3]. Group 2: Recent Investment Activities - Lin Yuan's recent investments include solid-state battery companies, with notable holdings in Jinlongyu and Delong shares, both of which have seen substantial price increases of over 110% and 120% respectively since last year [4][6]. - The solid-state battery sector is gaining traction, with expectations for commercial production to begin around 2027, driven by advancements in technology and increasing market demand [6]. Group 3: Market Trends and Performance - The solid-state battery market is characterized by high energy density and safety, positioning it as a next-generation battery technology. Companies like Jinlongyu and Delong are actively engaging in this space, with Jinlongyu's stock price rising significantly due to new orders [4][6]. - Lin Yuan's recent focus on liquid cooling technology stocks, such as Feilong Co., has also yielded positive results, with the stock price increasing nearly 100% following his involvement [11][12]. Group 4: Research and Analysis - Lin Yuan's research efforts in the tech sector are extensive, with a notable increase in his engagement with tech stocks over the past year, indicating a potential shift in his investment strategy [11][14]. - The liquid cooling technology market is experiencing explosive growth, driven by demand from major tech companies like NVIDIA and Microsoft, further highlighting the evolving landscape of technology investments [11][12].