Macro Economic Overview - The US economy shows signs of stagnation with July's service PMI nearly flat, indicating a slowdown in business activity and order demand [2] - Manufacturing PMI has dropped to a near one-year low, with employment contraction reaching a new high, while price expansion has slowed but remains significantly above post-pandemic averages [2] - Import indices and inventories are contracting, suggesting the end of a purchasing spree to avoid tariffs [2] Industry Insights - The cloud services sector is experiencing accelerated revenue growth among leading US cloud providers, with Amazon AWS, Google Cloud, and Microsoft Azure showing a combined year-on-year revenue growth of 23% in Q2 2025 [6] - Capital expenditure among leading cloud firms is being adjusted upwards due to strong demand, although supply constraints are expected to persist for the next six months [6] - AI-related capital investments are impacting profit margins, but operational efficiencies in core businesses are helping to mitigate these effects [6] Company Analysis - Xiaomi Group is expected to report strong Q2 2025 results, with revenue and adjusted net profit projected to grow by 32% and 66% year-on-year, reaching RMB 117 billion and RMB 10.3 billion respectively [7] - The growth drivers for Xiaomi include robust smartphone sales, strong demand for electric vehicles, and favorable policies for IoT [7] - The target price for Xiaomi is set at HKD 66.0, reflecting a P/E ratio of 34.4 for 2025 [7] Focus Stocks - Geely Automobile (175 HK) is rated as a buy with a target price of HKD 24.00, indicating a potential upside of 31% [8] - Luckin Coffee is also rated as a buy with a target price of USD 44.95, suggesting an 18% upside [8] - Tencent (700 HK) is rated as a buy with a target price of HKD 660.00, indicating a 16% potential increase [8]

Core Viewpoint - The article discusses the competitive landscape of the AI-driven cloud market, highlighting how Microsoft and Google face profit margin pressures in their cloud businesses, while Amazon's AWS presents a unique opportunity for profitability enhancement [1][2]. Group 1: Microsoft and Google's Cloud Business - Microsoft and Google's cloud businesses are experiencing strong growth, with Microsoft's cloud revenue increasing by 26% and Google's by 32%, outpacing their respective core business growth rates [2]. - Microsoft's "Intelligent Cloud" segment has a profit margin of 40.6%, while its "Productivity and Business Processes" segment boasts a higher margin of 57.4% [1]. - Google's cloud business has a profit margin of 20.7%, significantly lower than its advertising-focused "Google Services" segment, which has a profit margin of 40% [1][2]. Group 2: Amazon's AWS Potential - Amazon's AWS is the core profit engine for the company, with an operating profit margin of 33%, compared to just 6.6% for its e-commerce business [2][3]. - From 2017 to 2024, AWS's share of Amazon's total revenue is projected to rise from 9.8% to 17%, contributing to an increase in overall operating profit margin from 2.3% to 10.7% [2][3]. - Despite concerns over AWS's 17% growth rate, there are indications of potential acceleration, as AWS's backlog of future orders grew by 25% in the recent quarter [3]. Group 3: Market Perception and Risks - The article suggests that the market may be underestimating Amazon's potential by focusing too much on current growth figures rather than future profitability and unique profit growth models [3]. - Both Microsoft and Google face the risk of their overall profit margins being diluted by the rapid growth of their lower-margin cloud businesses [2][3]. - There is a concern that AI-driven products may erode the profitability of Microsoft's enterprise software and Google's search advertising businesses [2].

Core Viewpoint - The article emphasizes the importance of profitability structures over mere growth rates in the AI-driven cloud computing competition, highlighting that while Microsoft and Google experience rapid cloud growth, it may come at the expense of overall profit margins, whereas Amazon's AWS, despite slower growth, offers a healthier long-term profit outlook [1][3]. Group 1: Microsoft and Google's Cloud Growth - Microsoft and Google's cloud businesses are experiencing strong growth, with Microsoft's cloud segment growing by 26% and Google's by 32%, but both have lower profit margins compared to their core businesses [4]. - Microsoft's "Intelligent Cloud" segment has a profit margin of 40.6%, while its "Productivity and Business Processes" segment boasts a higher margin of 57.4% [4]. - Google's cloud business has a profit margin of 20.7%, significantly lower than its advertising-focused "Google Services" segment, which has a profit margin of 40% [4]. Group 2: Amazon's Cloud Business Potential - Amazon's AWS is the core profit engine for the company, with an operating profit margin of 33%, compared to just 6.6% for its e-commerce business [5]. - From 2017 to 2024, AWS's share of Amazon's total revenue is expected to rise from 9.8% to 17%, leading to an increase in overall operating profit margin from 2.3% to 10.7% [5]. - Despite concerns over AWS's 17% growth rate, there are indications of potential acceleration, as AWS's backlog of future orders grew by 25% in the recent quarter [5]. Group 3: Market Perception and Future Outlook - The market may be overly focused on current growth figures for Amazon, underestimating its future potential and unique profit growth model [6]. - Investors seem to be aware of the profit margin risks for Google, as reflected in its stock performance, while Microsoft appears to be receiving a premium valuation despite similar risks [5].

Core Insights - Microsoft's market capitalization has surpassed $4 trillion, overshadowing Amazon in the AI race, but the focus should shift from growth rates to deeper profitability structures in the AI-driven cloud competition [1] - The competition is not just about technology and growth but also about reshaping the profitability models of tech giants [1] Group 1: Microsoft and Google's Cloud Business - Microsoft and Google's cloud business are experiencing strong growth but face profit margin pressures, with Microsoft's "Intelligent Cloud" segment having a profit margin of 40.6% compared to 57.4% for its "Productivity and Business Processes" segment [2] - Google's cloud business has a profit margin of 20.7%, significantly lower than its "Google Services" segment at 40% [2] - The growth rates of cloud businesses for both companies are outpacing their higher-margin core businesses, with Microsoft cloud growing 26% and Google cloud growing 32% [2] Group 2: Amazon's Cloud Business - Amazon's AWS is the core profit engine, with an operating profit margin of 33%, while its e-commerce business has a profit margin of only 6.6% [3] - From 2017 to 2024, AWS's share of Amazon's total revenue is expected to rise from 9.8% to 17%, leading to an increase in overall operating profit margin from 2.3% to 10.7% [3] - AWS's backlog of future orders increased by 25% in the recent quarter, indicating potential for accelerated growth [3] Group 3: Market Perception and Future Potential - The market may be overly focused on current growth data for Amazon while underestimating its future potential and unique profit growth model [4] - There are common challenges across cloud service providers, including high capital expenditures for AI support that could pressure profit margins [3]

Group 1 - Microsoft's market capitalization has surpassed $4 trillion, overshadowing Amazon in the AI competition, but the focus should shift from growth rates to deeper profitability structures [1] - The AI-driven cloud competition is reshaping the profitability models of tech giants, with Microsoft and Google facing profit margin pressures from cloud business expansion, presenting an opportunity for Amazon to enhance overall profitability [1] - In the latest earnings season, Microsoft and Google reported accelerated growth in their cloud businesses, while Amazon Web Services (AWS) showed a more modest 17% growth rate, but its business structure reveals a different narrative [1] Group 2 - For Microsoft and Google, strong growth in cloud business comes at a cost, with Microsoft's "Intelligent Cloud" segment having a profit margin of 40.6%, compared to 57.4% for its "Productivity and Business Processes" segment, and Google's cloud business margin at 20.7%, significantly lower than its advertising segment's 40% [2] - The growth rates of cloud businesses for both companies are outpacing their higher-margin core businesses, with Microsoft cloud growing 26% and Google cloud growing 32%, indicating a potential dilution of overall profit margins as cloud business expands [2] - Amazon's AWS is the core profit engine for the company, with an operating profit margin of 33%, while its e-commerce business has a margin of only 6.6%, highlighting the significant role of cloud business in enhancing Amazon's profitability [3] Group 3 - AWS's share of Amazon's total revenue is projected to increase from 9.8% in 2017 to 17% in 2024, contributing to a rise in overall operating profit margin from 2.3% to 10.7%, indicating that cloud business expansion is a key driver of Amazon's profitability [3] - Despite concerns over AWS's 17% growth rate, there are indications of potential acceleration, as backlog business grew by 25% in the recent quarter, serving as a strong indicator of future revenue [3] - The market may be overly focused on current growth data for Amazon, underestimating its future potential and unique profit growth model [4]