Summary of IDC Industry Update and Company Recommendations Industry Overview - The IDC industry is shifting its core competitiveness from energy consumption metrics to scale effects and first-mover advantages in the AI era, with ultra-large IDC clusters, especially high-power clusters, becoming crucial. The power demand per cabinet has increased to over 100 kilowatts [1][4][6]. Key Points and Arguments - Long-term trends in computing power investment remain unchanged, although short-term adjustments may occur due to chip procurement and deployment rhythms. The growth in TOKEN volume and model iteration value continues to support ongoing investments, altering industry logic [1][5]. - The IDC sector has previously faced demand concerns, chip bans, and regulatory guidance, but the outlook is improving. The demand for computing power for AI model training is rapidly increasing, with major overseas companies accelerating data center construction [1][2][9]. - The chip ban previously led to a significant inventory write-down for NVIDIA's H20 servers, affecting approximately 390,000 server sales, corresponding to 160-200 megawatts of IT capacity. NVIDIA plans to launch the RTX Pro GPU, and domestic GPUs will also be delivered, alleviating tender and listing issues [1][10][11]. - Regulatory guidance has extended the approval time for energy consumption metrics, limiting local capacity oversupply, which benefits leading companies. The first batch of energy consumption metrics is expected to be approved in the third quarter [1][12]. Company-Specific Insights - Runze Technology has resumed its IDC renovation and is expected to achieve an 80%-90% listing rate by year-end, with a projected quarter-on-quarter performance increase. The company anticipates selling 200 megawatts of projects and delivering 220 megawatts of new projects, with a successful public REITs issuance expected to yield over 2 billion in investment returns [3][13][14]. - The company has a robust cash reserve of over 5 billion and plans to utilize public REITs for light asset operations, aiming to acquire related companies in the IDC industry [15]. - Runze Technology's energy consumption metrics have increased by 130% by the end of 2024, with all projects having the necessary metrics, laying a solid foundation for long-term growth [16]. Investment Opportunities and Risks - Despite recent pressures, the IDC sector is showing signs of recovery, with demand for high-power cabinets increasing. Short-term adjustments may present investment opportunities, particularly in companies with high-quality existing resources and listing rates [7][8]. - Recommended companies for further attention include: - GDS Holdings - Century Internet - Huayun Data - David Technology - Aofei Data - Data Port These companies have received high recognition in the market for their public REITs offerings and have various development highlights [17]. Overall Industry Outlook - The IDC sector's previous stock price suppression factors are improving, leading to a more optimistic outlook for future development. Runze Technology is the primary recommendation, with continued attention on other listed companies [18].

Group 1 - The A-share market is experiencing significant growth in sectors such as optical modules, AI computing power, and IDC computing power leasing, with the AI-focused ETF, Huaxia (159381), rising nearly 3% [1] - Zhongji Xuchuang, a leading optical module company, forecasts a net profit of 3.6 billion to 4.4 billion yuan for the first half of 2025, representing a year-on-year increase of 52.64% to 86.57% [1] - The company attributes its growth to strong capital expenditures from CSP customers and increasing demand for 400G and 800G optical modules driven by AI infrastructure and ASIC chips [1] Group 2 - The computing power sector shows high visibility in performance, strong industry sentiment, and significant capital attention, indicating potential for repeated activity [2] - The Huaxia AI ETF tracks the AI index of the ChiNext board, with over 33% weight in optical modules, and includes major companies like Zhongji Xuchuang, Xinyi Sheng, and Tianfu Communication among its top holdings [2] - The ETF has a low management fee rate of 0.15% and a custody fee rate of 0.05%, making it competitive among similar funds [2]

Group 1 - The A-share market saw a significant rise in sectors related to optical modules, optical communication, and the Nvidia supply chain, with the AI ETF tracking the ChiNext index increasing by 5.52% [1] - Key stocks in the AI ETF include leading optical module companies such as Zhongji Xuchuang, New Yisheng, and Tianfu Communication, with the top ten holdings also featuring major players in chip design and cloud computing [1] - The ETF has a low annual management fee rate of 0.15% and a custody fee rate of 0.05%, making it one of the most cost-effective options in its category [2] Group 2 - Nvidia's CEO Jensen Huang is scheduled to attend the China International Supply Chain Promotion Expo on July 16, marking his third visit to China this year [2] - The demand for high-performance chips like GPUs is expected to drive a surge in related equipment needs, benefiting domestic leading manufacturers who have advantages in market share and technology [2] - The industry is anticipated to experience high growth, with leading companies likely to capture more market share due to their established positions and technological expertise [2]

Group 1 - The A-share market continues its recovery trend, with active sectors including lithium mining, central enterprise banks, and ultra-high voltage, while the TMT sector is preparing for a pullback [1] - The AI ETF on the ChiNext, Huaxia (159381), shows active buying interest, with funds being subscribed during trading [1] - Demand for high-performance chips like GPUs is expected to drive the demand for related equipment such as optical modules, PCBs, and switches, benefiting leading domestic manufacturers [1] Group 2 - The ChiNext AI ETF Huaxia (159381) tracks the ChiNext AI Index, selecting AI-focused companies listed on the ChiNext, with a daily price fluctuation limit of ±20% [2] - The optical module CPO concept stocks account for over 33% of the ETF's weight, with the top three constituent stocks being NewEase, Zhongji Xuchuang, and Tianfu Communication [2] - The management fee rate is currently 0.15%, and the custody fee rate is 0.05%, making the overall fee rate the lowest among comparable funds [2]

Market Overview - The three major indices opened mixed, with the Shanghai Composite Index up 0.04% and the Shenzhen Component Index down 0.04% [1] - The iron ore, memory storage, and fiberglass sectors showed the highest gains, while the China Shipbuilding sector, AI corpus, and Kuaishou concept sectors experienced the largest declines [1] Index Performance - Shanghai Composite Index: 3,474.63, up 0.04%, with 845 gainers and 889 losers [2] - Shenzhen Component Index: 10,431.78, down 0.04%, with 1,073 gainers and 1,203 losers [2] - Northbound 50 Index: 1,403.84, up 0.14%, with 133 gainers and 100 losers [2] - ChiNext Index: 2,129.49, down 0.03%, with 546 gainers and 620 losers [2] U.S. Market Performance - U.S. stock markets opened lower and closed with the worst single-day performance since mid-June, with the Dow Jones down 0.94%, S&P 500 down 0.79%, and Nasdaq down 0.92% [3] - Notable movements in Chinese concept stocks included Bilibili up 7.66% and Alibaba down 2.24% [3] Institutional Insights - CICC reported that the active trading volume is a crucial indicator of capital market depth, suggesting a significant change in the asset and funding structure of the Hong Kong stock market, which may enhance long-term growth potential [4] - Huatai Securities indicated that the IDC sector is expected to benefit from the growing demand for intelligent computing centers, marking a potential turning point for the industry [5] - CITIC Securities maintained a "stronger than market" rating for the beauty industry, highlighting a 10%+ GMV growth during the recent 618 shopping festival [6] - Huatai Securities noted that domestic leading companies are likely to benefit from improved fertilizer demand and profitability due to global planting area growth and limited new industry capacity [7]

Summary of Key Points from Conference Call Records Industry Overview - The conference call discusses the domestic computing power industry, particularly focusing on the demand driven by AI and cloud service providers (CSPs) [1][2][3]. Core Insights and Arguments - **Strong Demand for Computing Power**: The domestic computing power industry is experiencing robust demand, with major companies maintaining rapid shipment growth. For instance, the daily token usage of the Doubao large model exceeded 16.4 trillion in late May, marking a 30% increase from April [2]. - **AI Tools Utilization**: The proportion of AI tool usage has risen from 15% at the beginning of the year to 30% [2]. - **Cloud Providers' Procurement Strategies**: Cloud service providers are stockpiling and leasing to secure computing power, with expectations of new procurement plans emerging after Q3 [1][3]. - **Growth in Light Module Demand**: The domestic light module industry is benefiting from increased demand from cloud providers, with Alibaba conducting large-scale tenders for high-speed light modules [4]. - **IDC Market Dynamics**: The IDC industry is expected to see a significant increase in demand, with Century Internet's delivery plan for 2024 set at 153 MW, and 400-450 MW for 2025, indicating a nearly threefold increase year-on-year [12][13]. Key Companies and Their Performance - **Ruijie Networks**: This company is leading the domestic market for data center switches, with a projected 120% growth in 2024. Its production capacity is expected to expand from tens of thousands to 150,000 units [9][10]. - **StarNet Ruijie**: Holding a 44.8% stake in Ruijie Networks, StarNet is expected to benefit from Ruijie's growth and the recovery of its subsidiaries, making it a noteworthy investment opportunity [11]. - **Light Module Suppliers**: Companies like Changguang Huaxin and Guangxun Technology are expanding their market share through overseas layouts and securing significant orders [4][19]. Market Trends and Future Outlook - **IDC Pricing and Supply-Demand Dynamics**: The IDC operational prices are nearing historical lows, with a potential for price stabilization and increases as demand outstrips supply [6][13]. - **Emerging Opportunities in Computing Power Leasing**: The computing power leasing market is seen as a strategic opportunity, with major companies expected to frequently place orders in Q2 and Q3 [7][8]. - **Light Fiber Demand Growth**: The demand for 654E type optical fibers is increasing significantly, with procurement volumes expected to triple in 2025 compared to previous years [17][20]. Additional Important Insights - **Market Structure Changes**: The recent procurement results showed a decrease in volume by 8% and a price drop of 30%, indicating a structural upgrade rather than a reduction in investment [19]. - **Competitive Landscape**: Companies like Bochuang Technology and Changfei Fiber are positioned well in both domestic and international markets, with significant shares in the optical fiber market [22][23]. This summary encapsulates the key points from the conference call, highlighting the dynamics of the computing power and optical fiber industries, along with the performance and outlook of key players.

Core Viewpoint - Century Internet is positioning itself as a platform company that aims to facilitate the transition into the world of Artificial General Intelligence (AGI) through innovative infrastructure and collaborative intelligence [1][4] Group 1: Strategic Vision - The founder of Century Internet, Chen Sheng, emphasizes the importance of creating a platform that serves as a gateway to the AI world, likening it to the magical 9th platform in Harry Potter [1] - The company aims to evolve from merely being a service provider to becoming an integral part of the collaborative intelligence ecosystem, participating actively in the development of new AI paradigms [2][4] Group 2: Technological Innovations - The company is focusing on upgrading its cloud computing platform to incorporate a comprehensive software virtualization that aligns with the emerging cloud-native technologies [3] - Chen Sheng highlights the need for advanced packaging of AI infrastructure, which is essential for delivering integrated hardware and software solutions to clients [3] Group 3: Infrastructure Development - Century Internet is committed to engineering innovation, with each infrastructure project being treated as a product that undergoes continuous iteration to achieve high quality and performance [4] - The company aims to create a seamless connection between clients and data centers, utilizing advanced protocols like RDMA to enhance performance [4] Group 4: Collaborative Intelligence Roadmap - The company has outlined a roadmap for developing a new generation of collective intelligence, starting with the private deployment of open-source large models and progressing towards decentralized networks [5] - The goal is to achieve significant milestones in collective intelligence through collaboration and shared success among stakeholders [5]

Group 1 - The A-share index opened lower but showed volatility, with active performance in sectors such as lithium batteries, Chinese language corpus, and optical module CPO concepts [1] - The AI computing power demand continues to rise, driven by accelerated shipments of Nvidia's GB200 and upcoming GB300 chips, alongside strong demand from major US cloud service providers [1][2] - Companies in the supply chain are expected to benefit from the expanding AI-driven computing power demand, with optimistic revenue guidance from firms like Broadcom and New Yisheng [2] Group 2 - The Huaxia AI ETF (159381) tracks the AI index of the ChiNext board, focusing on AI-related companies listed on the ChiNext, with a daily price fluctuation limit of ±20% [2] - The index covers the entire AI industry chain, emphasizing hardware, software, and applications, with a significant focus on leading companies in communication equipment and optical modules [2] - The top five constituent stocks include leading optical module companies New Yisheng, Zhongji Xuchuang, and Tianfu Communication, while the top ten also feature chip design firms and industry leaders in IDC, cloud computing, and data centers [2]

Investment Rating - The report suggests a positive investment outlook for the communication sector, particularly focusing on sub-sectors like optical communication and smart cards, which have shown better performance recently [1][10]. Core Insights - The communication industry is experiencing a downturn, with the overall index down by 0.78%, while specific sub-sectors like smart cards and optical devices have seen gains of 3.88% and 3.51% respectively [1][10]. - The integration of 5G and AI is expected to enhance profitability, with approximately 70% of the constituents in the 5G communication theme index having business related to 5G and about 76% related to AI [2][43]. - The report highlights a significant growth in revenue and net profit for the 5G communication theme index constituents, projecting a compound annual growth rate (CAGR) for revenue in the range of 10% to 30% over the next three years [2][45]. Summary by Sections 1. Weekly Market Performance - The communication sector index declined by 0.78%, while the overall market indices showed mixed results, with the Shanghai Composite down by 0.25% and the ChiNext up by 0.22% [1][10]. - Sub-sectors such as smart cards and optical devices performed well, with respective gains of 3.88% and 3.51% [1][10]. 2. Industry Development and Key Events - The global data center market is driven by AI, digitalization, and policy support, with the top ten data center service providers holding 59.5% of the total global resource capacity [24][26]. - The report notes a rapid increase in the proportion of large and super-large data centers in China, which are expected to dominate new constructions [26][30]. 3. 5G and AI Integration - The report emphasizes the high correlation between 5G and AI businesses, with a stable recovery in profitability observed [2][43]. - The constituents of the 5G communication theme index are projected to achieve a total revenue of CNY 1,788.51 billion in 2024, reflecting a year-on-year growth of 16.4% [2][45]. 4. Investment Recommendations - The report recommends focusing on high-quality stocks in sub-sectors with improving market conditions, particularly in optical communication and data centers [3][41]. - Specific companies to watch include Zhongji Xuchuang, New Yisheng, and Tianfu Communication, among others [3][41].

Group 1 - The AI sector is experiencing a pullback, with the ChiNext AI Index down by 1.54% as of 11:08, and several component stocks like Kunlun Wanwei and Tongniu Information dropping over 4% [1] - Mary Meeker's "AI Trends Report 2025" highlights a significant increase in training costs for AI models, which have surged approximately 2400 times over the past eight years, with predictions that costs could reach $1 billion by 2025 and potentially exceed $10 billion in the future [1] Group 2 - The technology sector's congestion has significantly decreased, and AI computing power is expected to recover as it is in a phase of accelerated expansion [2] - The ChiNext AI ETF (159381) tracks the ChiNext AI Index and selects AI-focused companies listed on the ChiNext, with a daily price fluctuation limit of ±20% and a low total fee rate of 0.20% [2] - The top ten component stocks of the ChiNext AI ETF include leading companies in optical modules, chip design, and cloud computing, with over 26.6% weight in optical module CPO concept stocks [2]