Special | Liang Xing Ma Yiwen
The artificial intelligence theme with a large adjustment in the early stage has recently become active again, and the relevant sectors have gradually become cost-effective, and you can pay attention to investment opportunities such as chips and communication equipment in the field of computing power.
The field of computing power will usher in multiple favorable catalysts: the official listing of the National Data Administration has entered the countdown, and the introduction of institutional systems and supporting policies in all aspects of data elements will be accelerated; From August 18th to 19th, the 2023 China Computing Power Conference will be held in Yinchuan; OpenAI is expected to release more powerful GPT-5 and more.
Digital economy + AI resonance
The hash power sector is once again in focus
According to the "China Securities News", on August 11, the official listing of the National Data Bureau has entered the countdown, and the introduction of various institutional systems and supporting policies for data elements will be accelerated, which is expected to accelerate the construction of data infrastructure systems and better play the role of the government in supervising and managing the data element market. Meanwhile, the 2023 China Computing Power Conference was held this week in Yinchuan, Ningxia. With the theme of "Leading the New Industry Trend and Striving for High-quality Development", the conference demonstrated that computing power, as a new productive force, injects new momentum into the digital transformation of all walks of life in a new form, and becomes an important driving force for high-quality economic and social development.
Since last year, the release of ChatGPT and GPT-4 is one of the important reasons for the strengthening of the computing power market. OpenAI has filed a GPT-5 trademark application, which will provide natural language processing, text generation, understanding, speech transcription, translation, prediction and analysis. From the perspective of market expectations, GPT-5 is expected to complete training by the end of the year, greatly improve performance compared to GPT-4 and realize primary AGI (General Artificial Intelligence) functions.
In fact, computing power is the most important infrastructure for the development of artificial intelligence. With the development of large model scenarios, the proportion of mainland supercomputing/intelligent computing centers is expected to further increase in the future. Based on this, attention can be paid to AI servers, switches, and optical modules required in the process of AI development. In particular, the demand for 800G optical modules from AI is growing rapidly, and from the statements of relevant listed companies, the current demand for 800G in the whole industry has at least doubled the demand expected at the beginning of the year, and it is expected that the demand for 800G will further grow next year.
Recently, overseas optical module companies released their second-quarter results, although some traditional business revenue fell month-on-month due to weak downstream demand in the second quarter, triggering stock price adjustment, but the growth of high-speed optical module demand helped the revenue of "network interconnection" business to increase month-on-month. At the same time, it looks forward to the future market space at the industry level, and expects high-speed optical modules with 800G and above speeds to grow at a compound annual growth rate of more than 40% in the next five years, from 600 million US dollars in 2023 to more than 4.2 billion US dollars in 2028.
Domestically, in July, the Ministry of Industry and Information Technology released the economic operation of the communications industry in the first half of 2023. In the first half of the year, the cumulative revenue of telecommunications business reached 868.8 billion yuan, a year-on-year increase of 6.2%. The total volume of telecommunications services calculated at constant prices in the previous year increased by 17.1% year-on-year.
The three basic telecommunications enterprises actively developed emerging services such as IPTV, Internet data centers, big data, cloud computing, and the Internet of Things, and completed a total of 188 billion yuan in emerging business revenue in the first half of the year, a year-on-year increase of 19.2%, accounting for 21.6% of telecom business revenue, driving telecom business revenue up by 3.7 percentage points. Among them, cloud computing and big data revenue increased by 38.1% and 45.3% respectively year-on-year, and Internet of Things business revenue increased by 25.7% year-on-year. Driven by the digital economy and AI, the communications industry will further benefit from the construction of computing power infrastructure.
The semiconductor boom is expected to ride the wind
There is a broad space for localization of equipment and materials
Recently, the performance of global technology giants has been intensively disclosed and firmly invested in AI infrastructure. Including Microsoft's capital expenditure in the second quarter significantly exceeded expectations, capital expenditure will continue to increase quarter-on-quarter in the new fiscal year; Google's cloud business is growing rapidly, and capital expenditure is expected to accelerate in the second half of the year, and investment in artificial intelligence will increase significantly; Meta's second-quarter results exceeded expectations, and capital spending continued to tilt towards AI. Computing power, storage, and advanced packaging will directly benefit from the outbreak of the AI industry chain.
However, the recent continuous decline in semiconductor chips is mainly due to the disturbance brought by the bottom of the industrial cycle, and the performance of some stocks is lower than expected, resulting in a short-term impact. For example, a leading design company reported lower than expected performance, mainly due to the mismatch of supply and demand caused by high inventory at the industrial supply chain, resulting in pressure on product prices and a significant impact on gross profit margins.
In addition, overseas sanctions have also caused market worries and had a greater impact on investment sentiment. Recently, market rumors say that the arrival of lithography machines in some domestic fabs will be delayed, the pace of expansion and order placement will also slow down, and the pace of some semiconductor equipment will also be adjusted. If the rumors are confirmed, it will cause disturbance to the company's short-term performance, but without changing the long-term development trend of the industry, domestic substitution breakthroughs are still the main theme of upstream equipment and materials in the industry.
From the perspective of high-frequency data, the bottom of the current semiconductor industry cycle is gradually appearing. According to data released by the Semiconductor Industry Association, global semiconductor sales in June were $41.5 billion, up 1.7% month-on-month, and sales rose slightly for four consecutive months; At the same time, mainland semiconductor sales in June increased by 3.2% month-on-month.
From the perspective of memory chips that are more commodities in the chip field, leading manufacturers Samsung, Hynix, Micron, and Kioxia have successively announced plans to reduce output and adjust capital expenditure, and the supply side is expected to gradually shrink. If downstream demand gradually recovers in the second half of the year and the relationship between supply and demand continues to improve, memory prices are expected to rebound. The current cycle of DRAM prices peaked in the third quarter of 2021, and the current downward cycle lasts for more than 1.5 years, the bottom of the memory cycle is approaching, and it is expected to bottom out in the second half of the year.
In addition, the author expects that Apple and Huawei will release new consumer electronics products in September, which is expected to actively drive demand, and the industry chain is currently actively stocking. Consumer electronics inventory is reasonable, and the performance of the third quarter is expected to improve positively driven by the demand for new machines.
For the semiconductor chip industry chain, since the trade war, semiconductor equipment and materials have been stuck in the neck, which is the key link of autonomous and controllable artificial intelligence in the future. From the perspective of equipment subdivisions, the localization rate of various varieties is generally below 20%, especially the localization rate of equipment such as lithography and thin film deposition is less than 10%, and the external dependence of materials such as photomasks, electronic special gases, photoresists and other materials is also relatively high.
Recently, the US President signed an executive order requiring US companies to apply for permission from the US government before investing in semiconductor, quantum information, and artificial intelligence-related projects in Chinese mainland, Hong Kong, Macao, etc., which is also expected to further catalyze the process of domestic substitution of semiconductor equipment and materials.
Benefiting from the rapid development of mainland wafer foundry and the policy and industrial support under the trend of domestic substitution, leading enterprises in the industry may directly benefit. At present, there are 14 constituent stocks of the CSI Semiconductor Material Equipment Index disclosed in the interim report, and the median upper and lower limits of the expected net profit growth rate are 50% and 29%, respectively, which is significantly better than the design, packaging and testing links, and the growth advantage is outstanding.
(This article has been published in the "Securities Market Weekly" on August 19, the views of the article only represent the author's personal, not the position of this journal, the individual stocks and funds mentioned in the article are only examples, not buy recommendations.) ）