Investment Rating - The investment rating for the industry is "Outperform the Market" (maintained) [1][7]. Core Insights - The report highlights that the domestic internet cloud service providers are expected to see accelerated revenue growth and improved profit margins driven by the popularity of the Deepseek model, which enhances AI penetration among traditional clients and expands application scenarios [2][4]. - The report anticipates a nearly 20% year-on-year growth in the overall cloud business this year, fueled by the rapid growth of AI cloud services [4]. Summary by Sections Cloud Service Performance - Revenue growth for cloud service providers is expected to accelerate quarter-on-quarter, with stable profit margins improving. The AI cloud-related business is experiencing rapid growth, significantly boosting revenues for major cloud providers like ByteCloud, Tencent Cloud, and Baidu Cloud [3][8]. - Specific revenue growth estimates for Q1 include: Alibaba Cloud at +23% YoY (up 10 percentage points QoQ), Tencent Cloud at +18% YoY (up 5 percentage points QoQ), and Baidu Cloud at +26% YoY [8]. Capital Expenditure and Computing Power Supply - Capital expenditure is projected to increase quarter-on-quarter, with a low risk of computing power shortages this year. Major cloud providers are expected to continue investing heavily in AI [3][9]. - The report notes that the risk of computing power shortages is low due to preemptive capacity reserves and leasing solutions, with a neutral to optimistic outlook on the delivery of H20 [9]. Progress in Large Models - The emergence of the Deepseek model has significantly advanced the progress of large models among domestic tech giants, narrowing the gap with international counterparts [13][15]. - Notable advancements include Alibaba's Qwen3 model outperforming Deepseek R1 and OpenAI's models, Tencent's establishment of a dedicated model department, and ByteDance's introduction of multiple AI applications [15][16]. Investment Recommendations - The report suggests focusing on the advancements in AI within cloud service providers and the progress of large models [17].