Guotai Haitong Securities released a research report stating that, based on patterns from past technology bull markets, overseas computing power currently has reasonable valuations with room for upward revisions. Domestic computing power holds significant long-term potential, with catalysts including performance realization expectations and a decline in risk-free returns. AI applications offer high valuation value for money, with a focus on the internet and media sectors. The main views of Guotai Haitong Securities are as follows:
Looking at history: Analyzing the subsequent development path of the AI market trend through the lens of past technology-driven structural bull markets. Throughout the history of the A-share market, the emergence of each major technology rally has been deeply aligned with industrial waves. Currently, the market has reached a high consensus on the AI industry trend, but after significant gains, how the trend will evolve has become a new focus. This report reviews the patterns of three technology-driven structural bull markets: consumer electronics in 2009-2010, gaming in 2013-2015, and lithium batteries in 2019-2021. It focuses on analyzing the stock price performance characteristics during their valuation expansion phases and profit-driven phases, aiming to provide a historical reference for assessing the current stage of various segments in the AI industry chain and to offer a basis for future investment positioning.
Valuation expansion phase patterns: Crowding indicators have limited reference value, while risk premium better measures valuation boundaries. In this phase, new technologies have just emerged, lacking profit support, but intensive industrial and policy catalysts create imagination space and drive sector valuation increases. Historical experience shows that during this period: 1) Crowding indicators have limited reference value: It is common for industry crowding to reach new highs in this stage. After indicators hit extreme values, the probability of a sector correction within 20 trading days is relatively high. However, over a longer period of 60-90 trading days, the trend is highly likely to reach new highs; 2) Risk premium measures the boundary of valuation expansion: When the industry risk premium (1/PE ratio - 10-year government bond yield) falls below the two-year rolling average minus one standard deviation, the valuation's response to positive news significantly weakens, and the trend enters a consolidation phase awaiting profit realization; 3) High valuation ranges are sensitive to liquidity changes: When valuations are at a low value-for-money level, expectations of liquidity tightening can easily trigger adjustments (e.g., the European debt crisis and central bank reserve requirement hikes in April 2010, the resumption of IPOs at the end of 2013, and the Fed's exit from easing in early 2021). Conversely, in an environment of loose liquidity, the value-for-money of sector valuations is passively raised, further opening up upside potential (e.g., the influx of incremental funds in 2014-2015 led to a further rise in gaming valuations).
Profit-driven phase patterns: Earnings exceeding expectations are the core driver of the trend, requiring vigilance against intensified industry competition and valuation constraints under a terminal value mindset. In this phase, profits begin to materialize, and earnings surprises are the core driver of upward trends (e.g., iPhone sales exceeding expectations in 2010, mobile game penetration exceeding expectations in 2013, and new energy vehicle penetration exceeding expectations in 2021). Historical experience shows that during this period: 1) Attention must be paid to valuation constraints under a terminal value mindset: In past technology structural bull markets, the peak stock prices of leading companies generally corresponded to a forward three-year valuation level (PE-FY3) of approximately 30-40 times. Given the lower visibility of longer-term profit forecasts, PE (FY3) can serve as an important reference for the valuation ceiling under a terminal value mindset; 2) Be wary of risks from intensified industry competition and overcapacity: Driven by profit-seeking capital, emerging industries often tend towards excessive capital expansion during profit upswings. Intensified competition and overcapacity gradually exert negative feedback on corporate profits. Since stock prices reflect expectations, industry valuations begin to adjust when the return on invested capital (ROIC) growth slows, which often signals the end of the industrial trend investment phase.
Investment recommendations: 1) Overseas computing power: In the profit-driven phase, ROIC is still accelerating as of 2025 Q3, with no apparent risks of intensified competition or overcapacity yet. The forward valuation PE (FY3) of leading companies is between 20-30 times, basically at a reasonable level, making it difficult to claim a bubble in the sector. Earnings revisions upward are the core driver for subsequent stock price increases; 2) Domestic computing power: In the valuation expansion phase, the long-term growth space brought by import substitution is huge. The short-term risk premium is approaching one standard deviation below the two-year rolling average. Expectations for performance realization driven by increased penetration rates, or a decline in risk-free returns, are important catalysts for the next round of market activity; 3) AI applications: In the valuation expansion phase, the valuation value for money, as measured by risk premium, is relatively high. However, the investment challenge lies in the difficulty of predicting the timing and domain of breakout applications. Nevertheless, Hong Kong-listed internet platform companies are certain beneficiaries. A sustained trend行情 in A-shares requires relatively high securitization rate support, with the media industry being the most noteworthy.
Risk warnings: The pace of AI application implementation may fall short of expectations; global geopolitical uncertainties are increasing.
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