Investment Rating - The report maintains a "Buy" rating for key companies in the AI sector, including Alibaba-W, Kuaishou-W, Tencent Holdings, and Baidu Group-SW [3][8][11]. Core Insights - The AI sector is experiencing a new cycle driven by advancements in computing power, algorithms, and applications, with a strong recommendation to increase exposure to the Hong Kong internet sector [3][8]. - Major companies like Alibaba and Tencent continue to invest heavily in AI, with Alibaba's Q1 2025 capital expenditure reaching 24.61 billion CNY, a year-on-year increase of 120.7%, and Tencent's capital expenditure at 27.48 billion CNY, up 91.4% year-on-year [11][12][17]. Summary by Sections AI Industry Dynamics - The report highlights the ongoing high investment in AI both domestically and internationally, with major cloud service providers maintaining robust capital expenditures [8][17]. - Alibaba's new model, Wan2.1-VACE, can perform multiple video generation tasks, while Tencent's mixed image model achieves image generation speeds in milliseconds [20][23]. Investment Recommendations - The report suggests increasing positions in Alibaba-W, Kuaishou-W, Tencent Holdings, and Baidu Group-SW, all of which are positioned well within the AI ecosystem [3][8]. - The expected growth in capital expenditures from these companies is anticipated to drive further advancements in AI applications and infrastructure [11][12]. AI Model Developments - New multi-modal models have been released by Alibaba, Tencent, and ByteDance, showcasing significant advancements in capabilities and performance metrics [20][23][31]. - The DeepSeek model has introduced innovative techniques to reduce training costs and improve efficiency, which could set a new standard in AI model training [32][34]. AI Applications - Baidu has launched its DeepSearch feature, which utilizes a vast content library to enhance search capabilities, offering a competitive edge over international counterparts [36][43]. - ByteDance's DBCopilot aims to streamline database management through AI, significantly improving operational efficiency [43]. Market Trends - The report tracks web traffic for AI applications, noting that DeepSeek leads in domestic web traffic, while ChatGPT remains dominant globally [44][46]. - The overall trend indicates a growing interest and usage of AI applications, with significant engagement metrics reported [44][46].

Investment Rating - The report maintains a "Buy" rating for key companies in the AI sector, including Alibaba-W, Kuaishou-W, Tencent Holdings, and Baidu Group-SW [3][8][11]. Core Insights - The AI sector is experiencing a new cycle driven by advancements in computing power, algorithms, and applications, with a strong recommendation to increase exposure to the Hong Kong internet sector [3][8]. - Alibaba and Tencent continue to maintain high capital expenditure, with Alibaba's Q1 2025 capital expenditure reaching 24.61 billion CNY, a year-on-year increase of 120.7%, and Tencent's at 27.48 billion CNY, a year-on-year increase of 91.4% [11][12]. - The report highlights the ongoing momentum in AI investments both domestically and internationally, with major cloud service providers in the U.S. also showing significant capital expenditure growth [17][19]. Summary by Sections AI Large Models - Alibaba launched the Wan2.1-VACE model, capable of generating videos from text and images, with over 330,000 downloads since its release [20][31]. - Tencent introduced the Image2.0 model, achieving image generation speeds in milliseconds, significantly enhancing user experience [23][24]. - ByteDance's upgraded Seed1.5 model demonstrated superior multi-modal reasoning capabilities, achieving state-of-the-art performance in 38 out of 60 benchmarks [27][29]. Algorithm Technology - DeepSeek's V3 model employs innovative techniques to reduce training costs and memory usage, achieving a 90% reduction in computational costs compared to dense models [32][34]. - Microsoft announced collaborations to enhance AI interoperability through the A2A protocol, aiming to streamline AI agent collaboration across platforms [35]. AI Applications - Baidu launched the DeepSearch feature, which utilizes a vast content library to provide intelligent search capabilities, enhancing user interaction and efficiency [36][43]. - ByteDance's DBCopilot tool optimizes database management through natural language processing, significantly improving operational efficiency [43]. Market Trends - The report notes a decline in web traffic for AI applications, with DeepSeek experiencing a 12.8% decrease in visits, while ChatGPT remains the most visited AI application globally [44][46].

Core Viewpoint - Volcano Engine launched new AI models including Seedance1lite for video generation and upgraded Doubao music model, aiming to enhance business applications and intelligent tools for enterprises [1] Group 1: Product Launch - The newly released Seedance1lite video generation model supports text-to-video and image-to-video capabilities [1] - Video generation duration options are available for 5 seconds and 10 seconds, with resolutions of 480P and 720P [1] - The models are accessible via the Volcano Ark platform for enterprise users and through the Doubao app for individual users [1]