Investment Rating - The report maintains an "Outperform" rating for the artificial intelligence industry [2] Core Insights - The report focuses on the progress and boundaries of model capabilities and applications, highlighting the differentiated development of overseas models and the cost-effectiveness considerations of enterprises [4][5] - Interest recommendation has emerged as the most significant application scenario for AI empowerment, particularly in advertising and gaming industries [4][6] - The competitive relationship between models and application enterprises is explored through five typical scenarios, indicating a shift in market dynamics [4][6] Summary by Sections Model Development and Market Share - Overseas models, particularly those from Google and Anthropic, dominate the market with significant shares due to their competitive pricing and advanced capabilities [9][10] - Domestic models are making steady progress, with no significant technological gaps observed among various players [9][10] Application Scenarios - Interest recommendation in advertising has shown substantial growth, with companies like Meta, Reddit, Tencent, and Kuaishou leveraging AI technologies to enhance ad performance [4][6] - The gaming sector, exemplified by platforms like Roblox, has also benefited from AI-driven recommendation algorithms, leading to increased exposure for new games [4][6] Competitive Dynamics - The report identifies five scenarios illustrating the competition between large models and traditional products, emphasizing the transformative impact of AI on existing business models [4][6] - The analysis suggests that AI products may replace traditional revenue streams, while also enhancing operational efficiency in areas like programming and customer service [4][6] Investment Recommendations - The report recommends investing in Tencent Holdings (0700.HK), Kuaishou (1024.HK), Alibaba (9988.HK), and Meitu (1357.HK) due to their potential for performance release driven by enhanced model capabilities [4]

Core Insights - The company launched three new AI models: Doubao Model 1.6, Doubao Visual Understanding Model, and Doubao Video Generation Model, enhancing capabilities in reasoning, multi-modal understanding, and GUI operations [1] - The Doubao Visual Understanding Model offers improved recognition, understanding, and detailed visual description capabilities [1] - The Doubao Video Generation Model can create high-quality videos from user-provided text and images, featuring rich detail layers [1] Product Enhancements - Doubao Model 1.6 series upgrades include enhanced knowledge coverage, logical reasoning, and lightweight deployment, making it suitable for a wider range of terminals and industry scenarios [1] - Doubao Image Editing Model 3.0 improves precision and efficiency, supporting high-definition detail restoration and style transfer for complex creative scenarios [2] - Doubao Simultaneous Interpretation Model 2.0 optimizes real-time translation capabilities across multiple languages, enhancing understanding of professional terminology and cross-cultural contexts [1] Ecosystem Development - The company announced the open-sourcing of core capabilities and the release of a model fine-tuning framework to lower development barriers [2] - A new enterprise model hosting solution was introduced, allowing secure deployment and operation of models trained on private data [2] - The launch of Responses API standardizes interfaces to help enterprises quickly integrate AI capabilities, reducing application development cycles [2]

Core Viewpoints - The restructuring of the industrial ecosystem through anti-involution is beneficial for sustainable profitability in various sectors [2][3] - Despite significant advancements in China's technology sector, market sentiment remains pessimistic, impacting the performance of tech stocks [2][5] - The Chinese manufacturing industry plays a crucial role in the global supply chain, with trade risks currently deemed manageable [2] Industry Insights - The current excessive internal competition in industries is hindering wealth accumulation and income growth, leading to layoffs and reduced innovation investment [3] - Legislative measures against unfair competition are being implemented, marking a shift towards a more regulated market environment [3] - The AI sector is experiencing rapid growth, with significant investments from global tech giants, indicating a strong future demand for AI-related infrastructure and applications [6][12] Investment Opportunities - The focus is on sectors aligned with new productive forces, particularly in technology and pharmaceuticals, which are expected to benefit from economic recovery [5][7] - The pharmaceutical sector is seen as having long-term investment value due to demographic trends and the potential for innovative drug development [7][13] - The technology sector's valuation is becoming attractive, especially in areas like AI and consumer electronics, as the market adjusts to new pricing realities [8][10] Macro Economic Context - The macroeconomic environment remains complex, with ongoing uncertainties in trade and economic fundamentals, leading to a focus on structural opportunities in high-performing sectors [10][15] - The Chinese asset market is gradually showing value, with expectations for improved profitability and market performance in the second half of the year [15] - The automotive industry in China is on the rise, with domestic brands gaining market share and expanding into higher-end segments [17] Sector-Specific Trends - The renewable energy sector is facing challenges due to overcapacity and competition, prompting a need for regulatory changes to foster healthier market conditions [16][18] - Companies with strong growth potential and competitive advantages are being prioritized for investment, particularly in sectors like automotive parts and electronics [19]

Core Insights - DeepSeek's monthly average downloads significantly dropped from 81.13 million in Q1 2025 to 22.59 million in Q2 2025, a decline of 72.2% [2] - The decline is attributed to user diversion to other applications that have integrated DeepSeek's open-source model, with 59.2% of lost users switching to Baidu App and 38.6% to Doubao App [2] - Major companies like Alibaba, ByteDance, and Baidu have launched cheaper competing APIs, further squeezing DeepSeek's market space [2] Company Overview - DeepSeek, developed by Deep Seek (Hangzhou) Technology Co., is an open-source AI product known for its low cost and high performance, with a training cost of only $6 million using 2048 NVIDIA H800 GPUs [3] - Despite the drop in downloads, DeepSeek's open-source strategy has contributed significantly to the industry's development [3] Industry Context - The AI model cost in China is significantly lower than that of international giants, with DeepSeek-R1's inference cost being about one-thirtieth of OpenAI's operational cost [5] - As of April 2024, approximately 305 large models have been launched in China, with 254 of them having over 1 billion parameters [4] Competitive Landscape - Baidu's Wenxin model 4.5 and X1 have been released, with the former outperforming GPT-4.5 in several tests and having an API call price only 1% of GPT-4.5's [5] - The competitive landscape includes various models such as Alibaba's Tongyi Qianwen, ByteDance's Doubao model, and others, each with unique features and pricing strategies [6] Technological Impact - AI technologies represented by DeepSeek are becoming core drivers of industry innovation, enhancing data integration, multi-modal analysis, and complex scenario simulation [7] - The lightweight nature, performance improvements, and rapid cost reductions of large models are accelerating their development and application in new industrialization [9]

Core Insights - The breakthrough in large model technology is driving the development of multimodal and agent technologies, enhancing industry efficiency and accelerating commercialization through policy compliance and capital resonance [1][2][4]. Market Dynamics - By 2025, China's large model technology is expected to experience explosive growth and structural optimization, transitioning from an auxiliary tool to a core productivity driver across various sectors including government, finance, manufacturing, and healthcare [2][4]. - In the first half of 2025, the bidding market for large models reached a record scale of 6.4 billion yuan with 1,810 projects, surpassing the total number of projects in 2024 [4][5]. - Baidu Smart Cloud emerged as the leading bidder with 48 projects and 510 million yuan in bid amounts, followed by iFLYTEK and Volcano Engine [4][5]. Technological Advancements - Significant breakthroughs in multimodal capabilities and agent technologies are fostering a positive cycle of technology, application, and business [7][8]. - The market is shifting focus from infrastructure to practical business applications, with over 50% of projects in the second quarter of 2025 being application-oriented [5][6]. - The integration of large models with industrial software is becoming a mainstream application mode, particularly in manufacturing [11][12]. Policy and Regulatory Framework - A comprehensive policy framework has been established at the national level, focusing on compliance, incentives, and infrastructure to guide the healthy development of the industry [14][15]. - As of June 30, 2025, 439 generative AI services have completed registration, indicating a move towards standardized development [14][15]. Regional Development - Different regions in China are adopting unique development paths for large models, with the Beijing-Tianjin-Hebei region focusing on technological breakthroughs, while the Yangtze River Delta emphasizes scene innovation and ecological cultivation [18][19][20]. Capital Market and Industry Collaboration - The surge in bidding orders for large model vendors is linked to internal innovation and policy support, with significant impacts on stock prices following major project wins [21][23]. - The integration of capital operations through mergers, strategic investments, and industry chain collaboration is accelerating the commercialization of large model technologies [25][26].

Macro and Strategy - The issuance of special bonds for land reserves has reached nearly 170 billion [7] - In the 24th week (June 9-15), the net financing of government bonds was 2,190 billion, and for the 25th week (June 16-22), it is expected to be 2,594 billion, with a cumulative total of 6.8 trillion [7][8] - The total general deficit as of the 24th week is 51 trillion, with a progress rate of 43.4% [7] Industry and Company Machinery Industry - The machinery industry index rose by 0.79% in May, underperforming the CSI 300 index by 1.06 percentage points [8] - The TTM price-to-earnings ratio and price-to-book ratio for the machinery industry are approximately 31.03 and 2.42, respectively, remaining stable month-on-month [8] - The PMI index for May was 49.50%, indicating a 0.5 percentage point increase, reflecting a gradual strengthening of domestic demand [9] - In May 2025, the sales of various excavators reached 18,202 units, a year-on-year increase of 2.12% [9] - Key investment recommendations include companies such as Huace Testing, Guodian Measurement, and XCMG [9][10] Internet Industry - OpenAI launched the o3-pro AI model, enhancing performance and output accuracy [10] - ByteDance released the Doubao large model 1.6, adopting a unified pricing model [10] - The overall performance of the internet sector remains stable, with recommendations for defensive stocks like Tencent Music and NetEase [11] China Petroleum (601857.SH) - China Petroleum has made significant advancements in energy supply and unconventional oil and gas development [12] - The company is focusing on a "reduce oil and increase specialty" strategy through refinery upgrades and extending the natural gas industry chain [13] - Profit forecasts for 2025-2027 are maintained at 167.4 billion, 170.9 billion, and 174 billion, with diluted EPS of 0.91, 0.93, and 0.95, respectively [13]

Investment Rating - The report maintains an "Outperform" rating for the industry, indicating expected performance above the market benchmark by over 10% [3][30]. Core Insights - The overall performance of the internet sector remains stable, with intense competition in the e-commerce industry as platforms continue to offer incentives to merchants and invest in new growth areas like instant delivery [2][26]. - Major players in AI, such as Tencent and Alibaba, are expected to benefit from their business scenarios in cloud computing and advertising, although short-term AI agent developments require further refinement [2][26]. - The report suggests focusing on defensive stocks with stable earnings and low valuations, specifically recommending Tencent Music and NetEase [2][26]. Summary by Sections Industry Investment Rating - The report rates the industry as "Outperform" [3][30]. Product Applications - OpenAI launched the o3-pro AI model, which excels in performance and precision, surpassing competitors in various tests [20]. - Meta introduced the V-JEPA 2 model, enhancing environmental understanding and prediction capabilities [20]. - ByteDance released the Doubao model 1.6, which supports multiple input types and has shown significant improvements in reasoning and mathematical capabilities [21]. Underlying Technologies - Alibaba's Tongyi Lab open-sourced the MaskSearch pre-training framework, enhancing AI's problem-solving capabilities [23]. - DeepMind and Brown University are developing "Force Prompt" technology for realistic motion simulation without 3D models [24]. Industry Policies - The Ministry of Industry and Information Technology discussed strategies to promote AI applications in manufacturing, emphasizing the importance of digital transformation [25]. Key Events Preview - The report highlights upcoming events such as the MWC Shanghai 2025 and the Amazon Cloud Technology Summit [28].

Investment Rating - The report maintains an "Outperform" rating for the industry, indicating expected performance above the market benchmark by over 10% [3][30]. Core Insights - The overall performance of the internet sector remains stable, with intense competition in the e-commerce industry as platforms continue to offer incentives to merchants and invest in new growth areas like instant delivery [2][26]. - Major players in AI, such as Tencent and Alibaba, are expected to benefit from their business scenarios in cloud computing and advertising, although short-term AI agent developments require further refinement [2][26]. - The report suggests focusing on defensive stocks with stable earnings and low valuations, specifically recommending Tencent Music and NetEase [2][26]. Summary by Sections Industry Investment Rating - The report rates the industry as "Outperform" [3][30]. Product Applications - OpenAI launched the o3-pro AI model, which excels in performance and precision, surpassing competitors in various tests [20]. - Meta introduced the V-JEPA 2 model, enhancing environmental understanding and prediction capabilities [20]. - ByteDance released the Doubao model 1.6, which supports multiple input types and has shown significant improvements in reasoning and mathematical capabilities [21][22]. Underlying Technologies - Alibaba's Tongyi Lab open-sourced the MaskSearch pre-training framework, enhancing AI's problem-solving capabilities [23][24]. - DeepMind and Brown University are developing "Force Prompt" technology for realistic motion simulation without 3D models [24]. Industry Policies - The Ministry of Industry and Information Technology discussed strategies to promote AI applications in manufacturing, emphasizing the importance of digital transformation [25]. Key Events Preview - The report highlights upcoming events such as the MWC Shanghai 2025 and the Amazon Cloud Technology Summit [28].

Core Viewpoint - ByteDance's recent launch of the Doubao model 1.6 represents a significant upgrade in its AI model family, enhancing both performance and cost-effectiveness, which is expected to directly benefit AI implementation across various industries [2][4]. Group 1: Product Launch and Features - The Doubao model family has been expanded with the release of Doubao model 1.6, Doubao Video Generation Model Seedance 1.0 Pro, and Doubao Real-time Voice Model, establishing itself as a leading model with full modality, full size, and high cost-performance [2][3]. - Doubao model 1.6 includes three models: 1. Doubao-seed-1.6, an all-in-one model supporting 256K context, deep thinking, multi-modal understanding, and graphical interface operations [3]. 2. Doubao-seed-1.6-thinking, a reinforced version focusing on deep thinking capabilities, with improvements in coding, mathematics, and logical reasoning [3]. 3. Doubao-seed-1.6-flash, a high-speed version with low latency and strong visual understanding capabilities [3]. Group 2: Performance Metrics - By May 2025, the daily token usage of Doubao model exceeded 16.4 trillion, marking a 137-fold increase since its initial release in May 2024 [2]. - Doubao model 1.6 has shown significant improvements in reasoning, mathematics, instruction adherence, and agent capabilities, supporting complex agent construction and enhancing AI productivity [2][3]. Group 3: Pricing Strategy - Doubao model 1.6 introduces a novel pricing model based on input length, with a uniform token price regardless of whether deep thinking mode is activated [4]. - For the most commonly used input range of 0-32K, the pricing is set at 0.8 yuan per million tokens for input and 8 yuan per million tokens for output, representing a 63% cost reduction compared to previous models [4]. - A promotional pricing tier has been established for inputs of 32K and outputs within 200 tokens, further lowering costs to 0.8 yuan per million tokens for input and 2 yuan per million tokens for output [4].

Investment Rating - The report rates the industry as "Outperform" [1][7]. Core Insights - The development of AI foundation models is progressing positively, with decreasing costs, which is expected to accelerate the adoption of AI applications [2][7]. - The report highlights specific companies to watch, including Empyrean Technology, Dameng Database, Beijing Kingsoft Office Software, Newland Digital Technology, Jiangsu Tongxingbao Intelligent Transportation Technology Co., Ltd., Guangzhou Sie Consulting, and Hehe Information, with Wuxi Unicomp Technology Co., Ltd. as a related target [2][7]. Summary by Sections - **AI Model Developments**: OpenAI's o3-pro model was launched, outperforming Google's Gemini 2.5 Pro and Anthropic's Claude 4 Opus in key benchmarks, with an 80% price reduction for the o3 model, enhancing its cost-effectiveness [8]. - **Doubao Model Launch**: The Doubao 1.6 model introduced innovative pricing based on input length, significantly reducing costs by 63% compared to previous models, which is expected to facilitate AI adoption across various industries [9]. - **Ant International's Stablecoin Plans**: Ant International plans to apply for a stablecoin license in Hong Kong, indicating a positive outlook on stablecoin development and potential market growth [10].