A report from China Galaxy Securities indicates that the ongoing development of AI infrastructure on the hardware side will ultimately transmit to downstream sectors of the industry chain. Performance-driven growth combined with AI empowerment remains the core driver for the media and internet industry. The bank's analysis suggests long-term benefits are anticipated for several areas: the core assets of Hong Kong-listed internet companies with increasing AI investment and multiple long-term tailwinds; AI applications and the related industry chain where AI integration is deepening; content sectors with consistent high-quality output and strong certainty for earnings release. The main perspectives from China Galaxy Securities are outlined as follows:
Review of 2025 Media Sector Performance: High-elasticity Segments Drive Significant Index Gains
Looking back at the AI market trend since 2023, market capital has consistently focused on upstream computing power hardware. The core rationale is that AI industry development follows the pattern of infrastructure preceding application. As a downstream application segment of the industry chain, the media sector has not yet fully realized the contribution of AI to revenue and profit. However, as downstream applications, supported by a mature computing power foundation, commence large-scale implementation and commercial validation, the bank believes the industry's investment focus is likely to shift downstream along the chain, potentially leading to a systemic revaluation of the application sector.
Deep Synergy Between AI Application Technology and Scenarios Unlocks Long-Term Growth Potential
The open-source wave initiated by domestic large language models is expected to foster a positive cycle of technological innovation and application deployment. The rapid growth in token usage signifies a swift increase in AI demand. Building on this, AIGC is driving an industrial revolution in content production, establishing a solid technological and industrial foundation for the implementation of multi-scenario downstream applications. The commercial pathways for various emerging business models are currently being explored and refined. The deep integration of technology and application scenarios, ultimately realized in downstream applications, is poised to unlock long-term growth potential for the media and internet industry.
Hong Kong Internet Sector Bottoming Out, Driven by Both AI and Earnings
Influenced by global capital diversion and other high-growth sectors in Asia, the Hang Seng Internet Index has experienced a significant adjustment since the beginning of the year, with valuations and pessimistic sentiment largely released. However, the core fundamentals of the industry have not fundamentally changed. Leading internet platforms maintain solid competitive advantages and demonstrate strong earnings resilience, further enhanced by AI's potential to open a second growth curve for these companies in the long run. The bank contends that as market risk appetite gradually returns, leading internet platforms possess ample room for valuation recovery.
Recommended stocks to watch include: 1) Hong Kong-listed internet companies: Tencent Holdings and Alibaba Group Holding Ltd (HKG: 9988) for their stable business growth and solid fundamentals; Bilibili Inc (HKG: 9626) for its continuously improving profitability as an internet video platform; Kuaishou Technology (HKG: 1024) for its leading domestic AI video tool product strength. 2) Companies related to the AI application and content production industry chain: Yidian Tianxia, BlueFocus Communication Group Co., Ltd., Kunlun Tech Co., Ltd., Mango Excellent Media Co., Ltd., Zhidemai, Century Huatong Group Co., Ltd., G-bits Network Technology (Xiamen) Co., Ltd., Perfect World Co., Ltd., and 37 Interactive Entertainment Network Technology Group Co., Ltd.
Risk warnings include: intensified market competition, content review and approval risks, weaker-than-expected demand for emerging business models, and slower-than-anticipated development of AI applications.
Comments