Artificial intelligence is driving a new paradigm within the internet and media sectors, with a focus on companies demonstrating strong potential for value creation.
Gf Securities Co.,Ltd. has released a research report outlining its views. Regarding AI and the internet, the firm is optimistic about the catch-up capabilities of domestic large language models and recommends monitoring their progress. Furthermore, it maintains a long-term positive outlook on companies with robust business models that possess potential for AI-driven transformation, awaiting a new phase of value release. In the media sector, the focus is on high-growth directions. For instance, the gaming segment remains within a growth cycle, with performance releases anticipated. For advertising and marketing, attention is advised on targets likely to benefit from AI infrastructure upgrades. The firm expects the overall box office for this year's summer season to be roughly flat or show slight year-on-year growth, though certain major blockbuster films are projected to achieve stronger results.
The core viewpoints from Gf Securities are as follows:
AI Industry's New Paradigm: Coding Ushers in the Agent Era
The report posits that since 2022, large models have undergone four iterations: text generation ushering in the Q&A era (user base expansion), enhanced context and visual capabilities (data capacity expansion), the reasoning and chain-of-thought era (depth of information expansion), and the current Agent era (self-planning, self-execution). As AI's problem-solving capabilities have significantly improved, token consumption has grown non-linearly. Currently, domestic models are demonstrating stronger cost-performance ratios and catch-up capabilities. The improvement of Agent tools is also driving deeper cost reductions and efficiency gains, pushing open the ceiling for content supply.
Internet Sector's AI Investment Phase Awaits Commercialization
The firm maintains a long-term positive view on the value of high-quality businesses. In social networking, the launch of WeChat's AI assistant testing, covering functions for assisted social interaction and life assistance, is noted. Tencent's AI office workbench, Work Buddy, shows good monetization potential in efficiency scenarios. Short video platforms maintain leadership in video models, with ByteDance's Seedance2.0 and Kuaishou's Kling3.0 showing strong growth in ARR scale. The report believes the business models of leading internet companies remain sound, awaiting a release period. Competition in music streaming has intensified in the short term, potentially leading to some stratification in future business models. Additionally, leading IP and collectible toy companies continue to upgrade interactive scenarios and broaden IP cultivation.
Gaming Industry's Competitive Landscape Eases, Growth Momentum Sustains
Attention is on a potential valuation recovery. The gaming sector is expected to see high year-on-year growth, with the improving growth trend continuing. According to industry data, the actual sales revenue of China's game market in the first five months reached 158.416 billion yuan, a year-on-year increase of 12.3%. The underlying growth momentum persists, with focus on valuation recovery following profit releases.
AI Empowers Advertising and Marketing, Coupling Efficiency Needs with AI Capabilities
For media platforms, the construction of AI advertising architectures and their role in ad retrieval and ranking is significant, aiding in more precise matching between ads and users. For programmatic advertising platforms, AI infrastructure development has notably enhanced model iteration capabilities, creating a flywheel for accelerated revenue growth and improved profit margins, as seen in companies like AppLovin and Mobvista in recent years.
Film and TV Performance Centered on Major Releases, Publishing Observes Textbook Pressure
As of June 24, the SW Film and Cinema Line Index had fallen 24.76% from the beginning of the year, underperforming the SW Media Index by 3.82 percentage points and the CSI 300 Index by 29.53 percentage points. The firm expects this year's summer box office to be roughly flat or show slight year-on-year growth, but some major films are anticipated to achieve better results. The top-tier films expected to lead the box office include titles such as "Welcome to Dragon Restaurant" and "A Change of Heart." Meanwhile, educational publishing companies have faced widespread performance pressure since the second half of the year due to stricter enforcement of supplementary teaching material policies, leading to a sector-wide downturn; a waiting period is anticipated.
Risk Warnings
Potential risks include sector-wide systemic risk, policy and regulatory risk, and technical risks for gaming companies.
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