Investment Rating - The report maintains an "Outperform" rating for the communication industry, indicating an expected growth exceeding the benchmark index by over 10% [1]. Core Insights - North American major CSPs have released their financial reports, indicating that AI has transitioned from a cost center to a revenue engine, leading to an urgent and genuine increase in capital expenditures for 2026, which are expected to exceed forecasts [2][17]. - The cloud business is experiencing significant growth through AI capabilities, with AWS cloud sales increasing by 20% year-on-year to reach $128.7 billion, and Google Cloud projected to exceed $70 billion in annual revenue by the end of 2025, driven by strong demand for AI infrastructure and solutions [3][17]. - The total capital expenditure planned by Amazon, Google, Microsoft, and Meta for 2026 is projected to reach $660 billion, a 60% increase from 2025 and more than double that of 2024, with Amazon's expected expenditure of $200 billion exceeding market expectations by $50 billion [5][19]. Summary by Sections Industry Trends - The AI investment cycle is distinct from previous cloud computing infrastructure phases, with the current capital expenditure cycle not showing signs of peaking, as evidenced by the rapid growth of AI tokens and the introduction of various automated programming workflows [6][20]. - The competition between CPO and optical module technology routes has caused market fluctuations, with concerns about the potential market space being consumed by CPO advancements [10][22]. Market Performance - The overall market saw a decline during the week of February 2-6, 2026, with the Shanghai Composite Index dropping by 1.27% and the Shenwan Communication Index falling by 6.95%. However, the optical cable and submarine cable sector experienced a notable increase of 19.05% [11][23]. - Individual stock performance showed significant gains for companies like Longfly Fiber and Tongyu Communication, while companies such as Zhongji Xuchuang and Lian Te Technology faced substantial declines [11][37]. Investment Recommendations - Companies to focus on include those involved in Scaleup/NPO such as Zhongji Xuchuang, Tianfu Communication, and Newyi Sheng, as well as those in passive optical components like Zhishang Technology and Changxin Bochuang [11][23].

Core Insights - Amazon's journey from a small online bookstore in 1994 to a global e-commerce leader is marked by strategic expansions and innovations, including the introduction of third-party seller platforms and Prime membership services [2][3] - Despite its success in Western markets, Amazon struggled in China due to a lack of local adaptation and competition from established players like Alibaba and JD.com [4][5] Group 1: Amazon's Growth and Innovations - Amazon started as a bookstore in 1994 and quickly expanded to music and video, going public in 1997 and raising $54 million, significantly increasing its valuation [2] - The launch of the third-party seller platform in 2000 and Prime membership in 2005 were pivotal in enhancing user experience and building a robust ecosystem [2] - By 2020, Amazon's revenue reached $386 billion with a net profit of $21 billion, and total assets nearing 6 trillion RMB, showcasing its massive scale [3] Group 2: Challenges in the Chinese Market - Amazon's entry into China involved acquiring the largest online bookstore, but its market share plummeted from 15.4% to 0.6% by 2018 due to fierce competition and misalignment with local consumer preferences [4][5] - The company's attempts to localize, such as launching Kindle and restructuring its platform, failed to resonate with Chinese consumers who preferred curated shopping experiences [4][5] - Amazon's management style, which did not empower local teams, contributed to its inability to adapt quickly to the fast-changing Chinese e-commerce landscape [5] Group 3: Strategic Shifts Post-Exit - After exiting the Chinese retail market in 2019, Amazon focused on its AWS cloud services and global selling platforms, which continued to support Chinese sellers [5][7] - The company has redirected resources to India, investing billions in local infrastructure and adapting its services to better fit the market [5][6] - Amazon's experience in China serves as a lesson in the importance of local adaptation, with the company now emphasizing cultural integration in its Southeast Asia strategy [6][7]

Group 1 - The core viewpoint emphasizes that an excellent investment window for AI applications is emerging, supported by the positive trends in Q3 financial reports, which show revenue growth of 5.04%, net profit growth of 27.31%, and non-recurring profit growth of 25.96% [1][2] - The report suggests that the current low holding levels in the sector and the upcoming performance vacuum period in November create favorable conditions for increasing positions in the computer sector, particularly in AI applications [1][2] - It is recommended to focus on high-potential leading companies with accumulated data and customer resources, as well as model capabilities that create barriers to entry, during this internal rotation opportunity [1][2] Group 2 - The performance of global cloud giants has accelerated, with Microsoft Azure, Google Cloud, and AWS reporting year-on-year revenue growth rates of 40%, 34%, and 20% respectively, driven by AI demand [2] - The increase in cloud business growth rates is attributed to the boost from AI, and cloud giants are increasing capital expenditures, indicating confidence in future development [2]

Core Viewpoint - The narrative surrounding technology giants has shifted from concerns about high AI-related expenditures to recognizing tangible revenue growth driven by AI in cloud services and advertising [1][3]. Group 1: Financial Performance - Microsoft, Alphabet, and Meta reported double-digit revenue and net profit growth, leading to a combined market capitalization increase of over $350 billion [1][3]. - Microsoft’s market capitalization surpassed $4 trillion, while Meta's stock surged by 11%, bringing its market value close to $2 trillion [3][5]. Group 2: AI Impact on Revenue - The latest earnings reports highlight how AI technology is translating into real revenue, with strong growth in Microsoft Azure and Google Cloud seen as direct evidence of AI demand boosting cloud business [4]. - Meta's financial results showed that AI has improved ad targeting, resulting in a 9% year-over-year increase in the price per ad and an 11% rise in ad volume, providing strong evidence of AI enhancing core business profitability [5]. Group 3: Capital Expenditure Trends - Investors have become more accepting of a new round of capital expenditure expansion, with projected spending on data centers and AI infrastructure by major companies expected to exceed $350 billion this year [6]. - Microsoft CEO Satya Nadella committed to investing $120 billion over the next four quarters, while Meta provided guidance for $105 billion in capital expenditures for the following year [6]. Group 4: Market Sentiment and Competition - The market sentiment has shifted positively due to strong demand for AI computing capabilities and a backlog of customer orders, leading to a more favorable view of capital expenditures [6]. - However, not all companies are thriving; Amazon's stock fell 7% post-earnings despite exceeding overall financial expectations, with analysts criticizing the growth momentum of its AWS cloud division [7]. Group 5: Regulatory Concerns - Despite strong performance, the future of Silicon Valley faces challenges from antitrust regulatory actions in the U.S., EU, and UK, which could lead to potential breakups or forced sharing with competitors [8]. - Companies like Alphabet, Meta, Microsoft, Amazon, and Apple are facing various legal challenges and investigations, adding uncertainty to the market [8].

Investment Rating - The industry investment rating is "Positive" (maintained) [1] Core Viewpoints - The report highlights the continuous investment by overseas giants in AI, emphasizing the importance of both overseas and domestic computing power [12] - Major companies like Meta, Microsoft, and Amazon are significantly increasing their capital expenditures to support AI-related infrastructure and services [12][14][16] - The report identifies seven key industry directions for investment, including AIDC data center construction, IT equipment, network devices, cloud computing, AI applications, satellite internet, and 6G [18] Summary by Sections 1. Investment Insights - Meta has raised its 2025 capital expenditure forecast to between $64 billion and $72 billion, focusing on AI model training and infrastructure [12][13] - Microsoft reported a 13% year-over-year revenue increase to $70.1 billion in FY2025Q3, with cloud revenue growing by 20% [14][15] - Amazon's AWS cloud revenue grew by 17% year-over-year to $29.3 billion in Q1 2025, with significant investments in AI infrastructure [16][17] 2. Communication Data Tracking - As of March 2025, China had 4.395 million 5G base stations, with a net increase of 145,000 stations from the end of 2024 [28] - The number of 5G mobile phone users reached 1.068 billion, reflecting a year-over-year growth of 22.20% [28][33] - In February 2025, 5G mobile phone shipments were 17.982 million units, with a year-over-year increase of 43.5% [28][38] 3. Operator Performance - In 2024, China Mobile's cloud revenue reached 100.4 billion yuan, a year-over-year increase of 20.4% [45] - China Telecom's Tianyi Cloud revenue was 113.9 billion yuan, growing by 17.1% [45] - China Unicom's cloud revenue was 68.6 billion yuan, also reflecting a 17.1% increase [45]