Shenwan Hongyuan has released a research report indicating that China's daily token consumption has surged over a thousandfold in two years. The shift of AI towards agent-driven interactions is fueling an explosion in cloud demand, highlighting the flexibility of providers such as KINGSOFT CLOUD. The gaming sector is seeing steady growth from evergreen titles and an acceleration in new game testing, benefiting companies like TENCENT and NTES. For internet platforms, the focus is on selecting stocks with low valuations and high user stickiness; TENCENT and BILIBILI are noted for their defensive qualities. Shenwan Hongyuan's key views are as follows:
Token explosion signals upside for AI cloud flexibility. The popularity of applications like Openclaw signifies a transition in AI from simple Q&A interactions to agent-based execution. China's daily token consumption has skyrocketed from around 100 billion in early 2024 to approximately 140 trillion by March 2026, representing growth exceeding 1,000 times in two years. AI is driving a definite upturn in prosperity for domestic cloud providers. Beyond large model training, ongoing demand for inference and the implementation of industry applications are continuously pulling cloud demand, strengthening the trend of accelerating revenue growth. KINGSOFT CLOUD is recommended, given its backing from the Kingsoft and Xiaomi ecosystems, the strong performance of Xiaomi's Mimo-V2 model, and Xiaomi's clear commitment to increasing AI investment. Alibaba is also recommended following the establishment of a technology committee with the CEO leading it, signaling a strategic resource shift towards AI and cloud, with its AI video model further validating technical capabilities. Shunwang Technology is suggested for monitoring. In the large model space, Minimax, Zhipu AI, and Kunlun Wanwei are highlighted.
Gaming: Evergreen titles continue to drive growth, with attention on new game performance in 2026. Reduced channel commission rates are benefiting cost structures. Major titles from TENCENT, NTES, Giant Network, and Century Huatong, including large-DAU games and SLGs, continue to contribute steadily to performance, reducing volatility from product cycles. Commission reductions by Apple in China and Google overseas are favorable for game developers, potentially leading to lower channel costs, which could boost profits or be reinvested into user acquisition, operations, and R&D. Starting from Q2 2026, new titles are entering testing and setting release dates, potentially providing growth support for the second half of 2026 and 2027. Recent positive surprises include TENCENT's pet-catching game "Roco Kingdom: World" and 37 Interactive Entertainment's SLG "Last Asylum," which performed well in March. April releases include TENCENT's "Honor of Kings: World," Perfect World's "Strange Ring," Kingnet Network's "Three Kingdoms: Hearts United," and BILIBILI's "Three Kingdoms: Hundred Generals Card." Key stocks to watch include Hong Kong-listed TENCENT, BILIBILI, XD Inc., and NTES. A-shares to watch include Giant Network, Century Huatong, 37 Interactive Entertainment, Kingnet Network, Perfect World, and G-bits.
Internet Platforms: Current market concerns regarding internet companies focus on potential disruption by AI, uncertainty around the ROI of AI investments, competition from ByteDance, and weak consumer spending. The firm suggests prioritizing internet platform and gaming companies that have low valuations, are insulated from ByteDance competition, and are less susceptible to AI disruption. Recommendations include TENCENT, which is set to release its Hunyuan 3 model in April and boasts high user stickiness in social and gaming, and BILIBILI, known for its highly engaged community, advertising performance above the market average, and optionality in gaming and AI. XD Inc. is noted for its Taptap platform's potential in AI gaming. Companies to monitor include Chizicheng Technology, focused on overseas markets and incubating the Aippy AI game creation platform, and Mobvista, for its AI-driven advertising growth.
Earnings forecasts for key companies in Q1 2026 project year-on-year growth exceeding 50% for Giant Network and G-bits. Growth in the 20-50% range is anticipated for Century Huatong, Focus Media, 37 Interactive Entertainment, Kingnet Network, and BILIBILI. Growth between 0-20% is forecast for Shenzhen Huaqiang Industry and TENCENT. Negative growth is projected for Focus Technology and Perfect World.
Risk factors include the potential for stricter content and internet regulations, risks of project delays or underperformance, intensified competition impacting profit margins, and the risk that content companies may fail to adapt promptly to the AI era, placing them at a competitive disadvantage.
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