Core Viewpoint - Nomura has upgraded Baidu's (BIDU.US) stock rating to "Buy" and raised the target price from $135 to $140, highlighting the significant growth potential of its chip design subsidiary, Kunlun Chip [1] Group 1: Company Performance - Baidu's AI high-performance computing facility subscription revenue has increased by 128% in Q3 [1] - Nomura estimates that Kunlun Chip's revenue could reach 2.6 billion and 5.4 billion RMB in the fiscal years 2025 and 2026, respectively, which is approximately 45% of the revenue forecast for domestic AI chip leader Cambricon during the same period [1] - The standalone valuation of Kunlun Chip is projected to reach $23 billion [1] Group 2: Market Conditions - The report indicates that Kunlun Chip and Alibaba's (9988.HK) subsidiary Pingtouge are expected to benefit from strong AI demand, especially given the challenges in procuring advanced chips from overseas [1] - Baidu's advertising business remains weak, and despite efforts to introduce digital humans and agents to increase revenue sources, these measures are not expected to reverse the declining trend in the business [1]

Investment Rating - The industry investment rating is "Overweight" indicating a positive outlook for the sector compared to the overall market performance [10]. Core Insights - The report emphasizes that the valuation reassessment of AI in the internet sector (including cloud computing, chips, and applications) is ongoing, driven by both domestic and global factors [3]. - The competition for entry points in the AI application market is intensifying, which is crucial for the monetization of AI applications [3]. - Key recommendations include major players like Tencent, Alibaba, Baidu, and Bilibili, focusing on their AI capabilities and growth potential [3]. Summary by Relevant Sections AI and Internet Sector - The report highlights the importance of self-reliance in AI technology as emphasized in the recent political meetings in China [3]. - Upcoming earnings reports from major US tech companies are expected to influence global AI investment narratives [3]. - The strategic expansion of OpenAI and ByteDance into various applications is noted as a significant trend [3]. Gaming Sector - The gaming sector has seen a correction, with previous high expectations now adjusted, making valuations more attractive [3]. - Companies like Huya and Bilibili are highlighted for their growth potential in the gaming market, with specific titles performing well [3]. - The report notes the long lifecycle and profitability of SLG games, with cash flow supporting new business explorations [3]. E-commerce and Entertainment - Pop Mart's stock price volatility reflects differing views on IP lifecycle management, with expectations for sales growth in North America [3]. - Mango TV is seen as stabilizing, with upcoming content expected to drive revenue growth [3]. - The report anticipates potential for increased membership and advertising revenues driven by popular content [3]. Valuation Table - A detailed valuation table is provided, showing market capitalizations and revenue projections for key companies in the gaming, cloud computing, and entertainment sectors [5]. - For instance, Tencent's projected revenue for 2025 is 74.64 billion RMB, with a net profit of 25.56 billion RMB, reflecting a year-on-year growth of 15% [5]. Key Recommendations - The report recommends focusing on companies with strong AI capabilities and growth potential, including Tencent, Alibaba, Baidu, and Bilibili, among others [3]. - It also suggests monitoring the gaming sector for emerging opportunities, particularly in companies like Huya and Bilibili [3].

Group 1 - The Shanghai Municipal Economic and Information Commission has issued the "Action Plan for High-Quality Development of the Intelligent Terminal Industry (2026-2027)", focusing on enhancing the layout of edge AI chips [1] - The plan emphasizes the acceleration of core chip layouts such as SoC and CPU, covering major technology routes including X86, ARM, and RISC-V, and supports the development of edge GPU chips [1] - A new type of chip has been developed in China, achieving over 1000 times the computing power of top GPUs, with significant improvements in throughput and energy efficiency compared to current top digital processors [1] Group 2 - The demand for AI chips is expected to reach $39.5 billion by 2025, with the localization rate of the AI chip market increasing from 17% in 2023 to 55% in 2027 [2] - Domestic AI chip manufacturers are making significant progress, with companies like Huawei, Baidu, and Alibaba showing promising performance and commercialization of their products [2] - The Sci-Tech Innovation Artificial Intelligence ETF (589520) has seen significant capital inflow, reflecting positive market sentiment towards the domestic AI industry [3] Group 3 - The Sci-Tech Innovation Artificial Intelligence ETF (589520) is highlighted for its three key advantages: policy support for AI development, emphasis on domestic alternatives for information security, and strong offensive potential due to its high concentration in semiconductor stocks [5] - The top ten weighted stocks in the ETF account for over 70% of its total weight, with the semiconductor sector representing more than half of the ETF's holdings [6]

Group 1 - The Hong Kong technology sector showed strong performance in early trading on September 19, with the Hong Kong Technology 30 ETF (513160) initially rising by 1.17% and trading volume exceeding 2.8 billion yuan [1] - Notable stocks leading the gains included SenseTime-W, InnoCare Pharma, Hua Hong Semiconductor, and SMIC, while stocks like Oriental Selection and Meitu led the declines [1] - Since August 29, the ETF has seen a continuous net inflow of funds, accumulating 1.29 billion yuan over 15 trading days [1] Group 2 - NVIDIA announced a $5 billion investment in Intel, resulting in a 22.77% increase in Intel's stock price, which has heightened market interest in the technology sector [1] - The progress of Alibaba's chip business (Pingtouge) is also attracting attention, contributing to the positive sentiment in the technology sector [1] - CITIC Securities reported that the performance of Hong Kong stocks in the first half of 2025 is stabilizing with positive growth, and they expect a turning point in performance growth in the second half of 2025 [1] Group 3 - The Hong Kong Technology 30 ETF (513160) closely tracks the Hang Seng Hong Kong Stock Connect China Technology Index, which includes mainland companies engaged in technology business listed in Hong Kong [2] - The top ten holdings of the ETF include major technology stocks such as SMIC, Kuaishou-W, Tencent Holdings, Alibaba-W, and Xiaomi Group-W [2] - For ordinary investors, investing directly in multiple Hong Kong technology stocks can be complex, but this ETF allows for a simplified investment in a basket of quality technology companies [2]

Group 1 - The H20 chip, previously banned by the US government, is crucial for AI model training in China and is now set to return to the market, indicating a shift in US-China tech relations [3][5][14] - Nvidia's revenue from the H20 chip in 2024 is projected to be between $12 billion and $15 billion, accounting for approximately 85% of its revenue from China [7] - After the ban, Nvidia suffered a loss of about $2.5 billion in sales in the first quarter, with an estimated total loss of $13.5 billion over two quarters [9][10] Group 2 - The return of the H20 chip signifies a tactical compromise in US-China relations, with both sides adjusting their strategies rather than fully decoupling [16][17][25] - Chinese companies have accelerated their development of domestic chips, with firms like Huawei and Alibaba investing in their own technologies to reduce reliance on foreign products [11][22][34] - The Chinese AI market has not stalled due to the H20 ban; instead, it has prompted faster domestic alternatives, potentially threatening Nvidia's market dominance in the future [14][19][51] Group 3 - The H20 chip's return is expected to restore supply chains and reduce costs for companies reliant on Nvidia, allowing AI projects to progress more rapidly [29][30] - The Chinese government is encouraging the use of domestic chips in new data centers, further supporting local technology development [34] - Despite the H20's return, some companies may still prefer Nvidia products due to their established reputation and compatibility, indicating a potential divide in corporate strategies [36][37] Group 4 - Nvidia is likely to focus on enhancing partnerships with leading Chinese AI companies and adapting its offerings to meet local regulatory requirements [43][46] - The competition between US and Chinese tech ecosystems is evolving, with both sides potentially developing parallel AI worlds [52][55] - The establishment of a self-sufficient Chinese AI ecosystem could lead to a significant shift in global tech dynamics, reducing dependence on Western technologies [60][61]