The AI application sector surged in Hong Kong markets before A-shares resumed trading post-holiday, continuing its strong pre-holiday performance in A-shares that made it a market spotlight.
Great Wall Fund manager Yang Weiwei provided professional analysis on the driving factors, future trends, and investment opportunities in the AI application sector. He noted the sector combines fundamental support with high risk-reward characteristics, emphasizing the need to focus on quality stocks that genuinely benefit from industry development while remaining cautious about performance divergence and stock price volatility.
Regarding market drivers, the strong performance of AI application stocks stems from dual support in fundamentals and positioning. Yang explained that fundamentally, after three years of intensive investment, the AI industry is entering a critical phase of application implementation, with some companies beginning to deliver results in financial reports. From a positioning perspective, institutional holdings in the computer sector related to AI applications have remained at multi-quarter historical lows, giving the sector inherently favorable risk-reward characteristics.
On future sector outlook, Yang observed that while previous gains were significant, they came with controversies as some lower-quality companies saw substantial price increases, giving the sector strong thematic characteristics. Recalling last year's trends, the AI application sector experienced periodic strength catalyzed by factors like DeepSeek and ChatGPT 5 releases and third-quarter reports, but quickly retreated due to market concerns about models overshadowing software. However, given that software companies in both China and the US generally trade at historical valuation lows, Yang believes the AI application sector still offers attractive risk-reward ratios, though investors must carefully select companies truly benefiting from large model advancements.
Analyzing technology iterations and market development patterns, Yang pointed out that database companies and application implementers have performed well in US markets, while China's AI application landscape has local characteristics. He highlighted three key sub-sectors: internet platforms leading large model innovation, AI infrastructure including cloud and database sectors, and computer software—particularly enterprise-focused B2B software deeply integrated with business processes, along with some B2C software benefiting from international expansion. These areas show breakthrough potential in industry development.
Regarding investment risks, Yang emphasized significant differences between AI application and computer hardware sectors, noting clear performance divergence among software companies with limited sector-wide earnings delivery. The logic for software companies benefiting from AI remains unclear, and market concerns about models "cannibalizing" software are not unfounded. The entire AI application sector remains in a risk-reward investment phase, likely experiencing substantial price volatility.
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