Internet and media sector valuations have undergone a significant correction since 2026, now resting at relatively low levels. However, the AI industry trend continues to evolve. Companies within the internet and software spaces that possess models, cloud infrastructure, user traffic, intellectual property, content assets, and customer scenarios are poised to lead the charge in AI monetization. For the latter half of 2026, the key focus areas are: 1) the enhancement of domestic large language models and the maturation of the open-source ecosystem; 2) sustained AI investment from major tech firms, with commercialization of cloud and applications gradually materializing; 3) the transition of applications like AI video, AI comics, and AI agents from productivity tools to revenue contributors; and 4) following a period of adjustment in self-indulgence consumption, high-quality companies achieving growth through international expansion, IP management, and product cycles.
Shenwan Hongyuan's core viewpoints are outlined below.
AI Cloud and Domestic Large Models
The domestic open-source ecosystem for AI cloud and large models is continually improving, with cost-performance advantages becoming increasingly pronounced. Commercialization models have been successfully validated overseas, with Anthropic focusing primarily on the enterprise sector and OpenAI rapidly increasing its enterprise client share. While domestic commercialization lags behind international markets, the rise of agent-based applications like those from OpenAI has spurred demand for multi-turn, long-context, and extensive programming capabilities, leading to a surge in need for cost-effective, high-performance models. This is creating a steep commercialization curve for domestic open-source models in the business-to-business segment. MiniMax's current Annual Recurring Revenue is estimated to exceed $300 million.
Major Tech Firm Investment and Commercialization
Major technology companies have clearly signaled increased capital expenditure, making comprehensive bets on AI. AI has become a core revenue driver for internet cloud providers, where technological capability is key to differentiation and margin improvement. This primarily relies on: 1) State-of-the-art models, with higher-margin services like Model-as-a-Service gaining share; and 2) In-house developed chips, leading to cost reduction. The full-stack AI capabilities of major internet firms are diverging: Alibaba and Baidu excel in infrastructure, while Tencent and ByteDance lead in scenario access points.
AI Applications: Video and Content Production
AI applications in video and content production are among the first to see practical implementation, benefiting IP owners, platform operators, and infrastructure service providers. AI video and AI comics are already transforming the industry across content supply, production efficiency, and distribution monetization. Content platforms and rights holders are finding new monetization and user acquisition possibilities through AI. Video platforms stand to benefit from increased content supply and enhanced user engagement. Infrastructure services, including copyright services, computing power, and large models, also present significant opportunities.
Key companies to watch in this area include: Yeahka, Mobvista, Bilibili, XD Inc., COL Digital, China Literature, and Fubo Group.
Self-Indulgence Consumption
Following a substantial adjustment since the second half of 2025, the focus for 2026 shifts to earnings sustainability and the realization of globalization strategies. Game publishing remains an industry trend, with attention on product cycles, revenue stream continuity, and overseas growth rates in the latter half of the year. Key companies to monitor include: NetEase, Century Huatong, Giant Network Group, XD Inc., 37 Interactive Entertainment, Perfect World, Kaiying Network, and G-bits Network Technology. For trend toy exports, success hinges on long IP lifecycles, supply chain management, and localized operations. In sectors like building block toys, live performances, and social app exports, focus should be on new category expansion, replication in overseas markets, and platform capabilities.
Notable companies in this segment are: Pop Mart, Damai Entertainment, and Bruco.
Risk Factors
Potential risks include changes in the regulatory environment for content and internet platforms; project delays or underperformance; intensified competition impacting profit margins; and the risk that content companies may fail to adapt swiftly to the AI era, placing them at a competitive disadvantage.
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