CITIC Securities anticipates that the computing power sector's 2025 performance will sustain robust growth, underpinned by the continued realization of capital expenditure from major Cloud Service Providers (CSPs), the ongoing release of Token demand, and continuous improvements in product capabilities. AI applications are showing structural highlights, with outstanding performances in areas such as AI FinTech, AI healthcare, and AI data, while general-purpose Agent applications are also demonstrating resilient growth. The overall profitability of the sector is expected to improve significantly. Looking ahead to 2026, the high growth trajectory of computing power is likely to persist, and AI applications are approaching an inflection point of opportunity. On the revenue front, computing power maintains high growth momentum, while applications show distinct bright spots. CITIC Securities forecasts that the computing power sector will sustain high-growth performance in 2025, driven by the continued fulfillment of Capex from major CSPs and the steady release of Token demand. The firm expects AI applications to exhibit structural strengths, with notable performances in AI FinTech, AI healthcare, and AI data; general-purpose Agent applications are also growing resiliently. Additionally, sectors like information technology innovation and satellite internet are showing structurally impressive performances. On the profit front, the sector's overall profitability is expected to improve markedly. CITIC Securities predicts that the profit growth rate of the computing power sector in 2025 will align with its high revenue growth. Some AI application companies are demonstrating high profit elasticity, while the majority of loss-making companies are generally seeing reduced losses or turning profitable, leading to a significant enhancement in the sector's overall profitability. The 2026 investment outlook focuses on seizing the inflection point for domestic AI. Domestic computing power is expected to continue its high-growth trend, while AI applications are poised for an inflection point opportunity, supported by model innovation, overseas expansion, and domestic demand support. Looking to 2026, competition in domestic computing power is gradually shifting from single-card computing power comparisons to system-level competition, such as hyper-node systems. Hyper-node system-level capabilities will become a critical factor for computing power providers in the next phase of competition. Concurrently, against the backdrop of major CSPs accelerating Capex investments and sustained Token demand release, the development of computing power possesses high certainty. At the AI application level, enhanced model capabilities combined with new opportunities for overseas expansion indicate that the inflection point for AI applications has arrived, warranting a potential value revaluation. AI applications are progressively evolving from scenarios like Chatbots, Coding, search, and customer service to broader applications involving multimodality, Agents, and embodied intelligence. Domestic AI application companies are accelerating their presence in overseas markets, competing for a share of the global AI application market, with international operations bringing new commercial value. From a domestic demand perspective, policies are expected to further increase support for technology sectors driven by internal demand, such as satellites, healthcare, and consumer tech. CITIC Securities believes the inflection point for domestic AI has arrived. Key risk factors include potential deviations between forward-looking performance forecasts and actual company disclosures; macroeconomic development falling short of expectations; slower-than-expected progress in artificial intelligence technology; domestic government and corporate IT spending failing to meet targets; intensification of international trade frictions; related industrial policies not meeting expectations; and slower-than-anticipated expansion into overseas markets. Regarding investment strategy, CITIC Securities expects the computing power sector's 2025 performance to maintain robust growth, supported by the continued realization of Capex from major CSPs, the ongoing release of Token demand, and improvements in product capabilities. AI applications are projected to show structural highlights, with strong performances in areas like AI FinTech, AI healthcare, and AI data, while general-purpose Agent applications continue resilient growth. The overall profitability of the sector is also expected to improve significantly. Looking ahead to 2026, the high growth in computing power is likely to continue, and AI applications present an inflection point opportunity. Recommendations include focusing on: 1) AI infrastructure; 2) AI applications; 3) AI healthcare; and 4) satellite internet.
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