Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **domestic computing power industry chain** in China, particularly highlighting the **switching equipment sector** which has recently reached a profitability inflection point [1][2][5]. Core Insights and Arguments - The **domestic data center sector** remains stable despite a slowdown in new data center tenders, with major internet companies showing steady rack installation rates [2][4]. - The **demand for optical modules** is rapidly increasing, particularly for 800G and 1.6T modules, driven by major players like BBAT and Huawei, indicating strong investment in AI computing power [3][10][11]. - The **profitability of the domestic computing power chain** has improved due to scale effects, with significant increases in shipment volumes and revenues for domestic servers, optical modules, and switches [2][5]. - The **Ethernet switch market** in China is primarily driven by demand from large internet companies, which prefer SDN (Software Defined Networking) and white-box switches over traditional IB (InfiniBand) switches [6][7]. - **White-box switches** offer configurability and rapid iteration capabilities, making them more suitable for the dynamic traffic needs of data centers [8]. - The **high gross margins** in the switching industry are attributed to hardware production and collaborative R&D with internet companies, which involves complex software technologies [9]. Additional Important Insights - The **data center REITs projects** have been approved, providing a benchmark for asset valuation, with the REITs market offering around 15 times EV/EBITDA valuation levels [3][19][20]. - The **AI training and inference demand** is a key driver for the growth of the domestic computing power chain, with major companies like Alibaba and Tencent increasing their AI computing investments [11]. - The **domestic data center industry** faces challenges such as chip shortages, which have slowed down order fulfillment, but long-term prospects remain positive as these issues are expected to be resolved [17]. - **Policy support** for the data center industry includes project approvals and energy consumption indicators, which helps maintain a balanced supply-demand dynamic [18]. - The **current market conditions** suggest a favorable outlook for the domestic computing power chain, with expectations of improved performance in the upcoming reporting season [21]. Recommendations - Companies such as **Hua Gong Technology** are recommended for investment due to their leading position in the optical module market and expected improvements in profitability as demand for 400G and 800G modules rises [14][15]. - Attention is also drawn to **Xingwang Ruijie and Ruijie Networks** in the switching sector, which are expected to benefit from the industry's profitability improvements [9].