Investment Rating - The report maintains a strong positive outlook on the AI application-driven demand for computing power, indicating a high growth trajectory for the industry [3]. Core Insights - The report emphasizes that the domestic computing power capacity bottleneck is expected to be broken through, with a significant increase in domestic chip production anticipated by 2026 [3][5]. - The acceleration of commercialization by overseas AI giants like OpenAI is driving widespread adoption of AI applications, sustaining high demand for computing hardware [3]. - The ongoing U.S.-China tensions are not expected to alter the positive trend in the AI industry, but rather increase the urgency for domestic computing power adoption [5]. Summary by Sections Domestic Computing Power Industry - Cambricon (688256) reported a Q3 2025 revenue of 1.73 billion, a year-on-year increase of 1332.5%, and a net profit of 570 million, marking a turnaround from losses [4]. - The first three quarters of 2025 saw a revenue of 4.61 billion, up 2386.4%, with a net profit of 1.61 billion, also a turnaround from losses [4]. - Inventory levels increased to 3.73 billion in Q3 2025, indicating that supply chain disruptions may have been resolved, suggesting a potential for performance growth as the industry adapts [4]. U.S.-China Tensions - The Nexperia incident highlights the ongoing geopolitical tensions, with the Dutch government restricting operations of Nexperia due to economic security concerns, leading to Chinese government countermeasures [5]. - This situation underscores the competitive dynamics in the global market, emphasizing the need for domestic computing power solutions [5]. Demand Side Dynamics - Major Chinese internet companies like ByteDance and Alibaba exhibit a "real demand" for computing power, driven by the need for intelligent computing to support business operations and the rise of generative AI applications [6]. - The report suggests focusing on key players in the domestic computing hardware supply chain, including Cambricon and SMIC (981.HK), as well as Huahong Semiconductor (1347.HK) for investment opportunities [6]. Communication Capabilities - The demand for ASICs from companies like Google, Meta, and AWS is expected to drive an increase in optical module demand, with anticipated shipments of 1.6T optical modules exceeding 10 million units in 2026 [8]. - The report predicts that the optical communication industry will continue to thrive in the AI era, with leading firms benefiting from technological innovations [8]. Edge AI Opportunities - Meta's recent announcements regarding AI smart glasses and OpenAI's plans for AI hardware indicate a growing market for edge AI devices [9]. - The report highlights investment opportunities in companies involved in edge storage chips and hardware collaborations within the Apple supply chain [9]. Investment Recommendations - The report recommends buying shares in Cambricon (688256), SMIC (0981.HK), and Huahong Semiconductor (1347.HK) among others in the domestic computing power sector [12]. - It also suggests investment in companies like Zhaoyi Innovation (603986) and Baiwei Storage (688525) in the domestic storage sector, as well as various overseas CSP/ASIC supply chain companies [12].

Group 1 - The article discusses the limitations of the traditional "SFT followed by RL" paradigm in post-training for AI models, suggesting a unified approach that combines both methods [7][9][10] - It highlights the importance of post-training in aligning the model's capabilities with human values and preferences, addressing the challenges of "catastrophic forgetting" and overfitting associated with SFT [8][11][12] - The emerging trend in the industry is to explore a unified framework for post-training that leverages the strengths of both SFT and RL, rather than treating them as separate processes [10][15][17] Group 2 - The article evaluates the competitive landscape of AI hardware among major players like Meta, OpenAI, Apple, and Google, questioning whether AI hardware will become a new essential or merely a passing trend [2] - It raises questions about the user experience with AI hardware, such as whether it will truly replace traditional devices or simply serve as an additional feature [2][3] - The potential for innovative AI hardware forms to integrate seamlessly into daily life is explored, along with the implications for user interaction and technology adoption [2][3] Group 3 - The article examines the role of generative AI in search, debating whether it will serve as a replacement for traditional search engines or act as a growth engine for expanding user queries and intentions [3] - It discusses how multimodal interactions and conversational AI are redefining task completion for users, potentially enhancing the value of advertising and commercial opportunities [3] - Google's strategy of gradually integrating AI capabilities into its products, rather than waiting for full technological maturity, reflects a proactive approach to product development and market positioning [3]

Market Overview - The market experienced a pullback after reaching a high, primarily due to the Federal Reserve's decision to maintain the benchmark interest rate between 4.25% and 4.50%, and the lack of strong stimulus signals from recent policy meetings [2][17][20] - Economic data showed weakness, with the manufacturing PMI falling to 49.3%, leading to a decline in market sentiment and a decrease in risk appetite among investors [2][17][20] - The market is expected to enter a consolidation phase with limited downward space, although individual stock differentiation may increase [3][18][19] Sector Performance - The pharmaceutical sector, particularly innovative drugs, showed strength, driven by favorable policy changes and a recovering market environment [9][10] - The renewable energy sector, including solar and wind energy, is anticipated to remain active due to ongoing global efforts to achieve carbon neutrality and supportive government policies [9][10] - The semiconductor sector is projected to grow significantly, with a forecasted increase of over 15% in the global semiconductor market by 2025, driven by rising demand for AI and high-performance computing [12] - The military industry is expected to receive continued policy support, with a stable increase in defense budgets and potential catalysts from geopolitical tensions [14] Investment Strategy - Investors are advised to focus on high-quality sectors and select stocks with solid fundamentals and reasonable valuations, especially during the earnings verification period in August [3][19] - Caution is recommended for stocks that have risen significantly but have uncertain earnings prospects, as they may face substantial pullback pressure [3][19] - For aggressive investors, attention should be given to technology growth stocks that have corrected to attractive levels, while conservative investors should wait for market stabilization [3][19]

Group 1: Market Overview - The public fund holdings data for Q2 2025 shows a stable increase in the electronics sector and a significant rise in the communications sector holdings [1] - The initial asset revaluation driven by the DeepSeek market was interrupted by tariff disturbances in April, but since May, the revaluation has been led by financial, consumer, and pharmaceutical sectors, pushing the Hang Seng Index back to 24,000 points [1] - Despite experiencing rapid growth, the negative pressures in Q3 are expected to be milder than market expectations, indicating a potential recovery in the market [1] Group 2: Sector Analysis - The semiconductor sector saw a slight decrease in holdings, but the high demand for computing power has boosted PCB holdings [1] - The consumer electronics sector experienced a decline in holdings due to tariff uncertainties affecting the supply chain [1] - The communications and security sectors saw a significant increase in holdings, with the optical communication industry benefiting from overseas demand for computing power [1] Group 3: Future Outlook - The Hong Kong stock market is expected to reach new highs in the second half of 2025, with three major sectors being promoted: semiconductors and components, consumer electronics, and communications/security [3] - The semiconductor sector is anticipated to grow due to clear demand growth, the formation of a positive cycle in AI, and improvements in the competitive landscape [3] - Structural opportunities are expected to dominate the market, with a focus on sectors benefiting from AI applications and hardware innovations [3] Group 4: Stock Recommendations - Recommended stocks in the semiconductor sector include Hengxuan Technology, Rockchip, Shenzhen South Circuit, SMIC A/H, and Huahong Semiconductor [4] - In the consumer electronics sector, attention is drawn to the trend of AI hardware upgrades, particularly in AI mobile hardware and wearable devices [4] - For the communications/security sector, recommended stocks include Lens Technology, Industrial Fulian, Sunny Optical, Huaqin Technology, and Gao Wei Electronics, with a focus on the ongoing demand for computing power [5] Group 5: Additional Recommendations - Additional stock recommendations include Lenovo Group, Zhongji Xuchuang, Ruijie Networks, Guangxun Technology, and Yiyuan Communication, focusing on the sustained demand for computing power and infrastructure upgrades [6]