Is the AI narrative in the technology sector shifting from hardware to software applications?
Driven by strong performance, U.S. stock AI advertising marketing leader AppLovin's stock surged 46% on the day of its Q3 earnings report, with a year-to-date increase of up to 650%. According to the financial report, the company's AI recommendation engine AXON drove software platform revenue, including the AppDiscovery advertising engine, to $835 million, a year-on-year increase of +66%. The logic of AI software has been successfully interpreted by AI-driven performance.
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AppLovin's rise is not an isolated case; other related stocks such as Shopify, Duolingo, Palantir, and CRM have also recorded good gains this year.
Cinda Securities believes that with strong performance validated by AppLovin as an agent, the commercialization of AI advertising has been confirmed. From the perspective of industrial development logic, hardware companies are accelerating the implementation of AI models and applications, while the emergence of applications is expected to bring new demand for hardware. With the deployment of B cards, inference optimization, and model optimization, inference costs are expected to be significantly reduced, and various forms of AI applications are gradually expected to meet the conditions for emergence.
<h2>What is AI marketing doing? Taking AppLovin as an example</h2>
Cinda Securities stated that AppLovin is a comprehensive end-to-end software platform that creates value by helping companies reach users, expand their business, and maximize revenue. Specifically, AppLovin's software platform is powered by the AI-based recommendation engine AXON, enabling advertisers to automate their marketing, engagement, and monetization efforts.
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Taking AppDiscovery as an example (which accounts for the vast majority of AppLovin's revenue). AppDiscovery is supported by Axon's predictive algorithms, allowing advertisers to match their applications with users who are more likely to download them.
This personalized advertising format focuses on the end user, enabling advertisers to find the right users and provide them with more content they may be interested in. Advertisers can not only attract users to download but also find a large number of users who continue to use their applications, resulting in higher retention rates and ultimately better profit opportunities.
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AppLovin's system is built around optimizing advertisers' revenue, so AppLovin's algorithm automatically adjusts based on the likelihood of user engagement. Advertisers set goals and return on ad spend targets, and AppLovin's algorithm adjusts costs and campaign details to meet these objectives.
By maximizing the monetization of its ad inventory to generate incremental revenue, AppLovin provides monetization services for advertisers. AppLovin's tools operate at microsecond speeds and at scale to enhance developers' monetization while maintaining the end-user experience.
MAX is AppLovin's in-app bidding software. Auctions through MAX are more effective than historical tools and methods because MAX brings more targeted users to advertisers and enables publishers to achieve more competitive prices for each impression.
Compared to traditional monetization tools, many developers integrating MAX have seen measurable growth in daily active users' average revenue per daily active user (ARPDAU) and have saved considerable time as they can automate manual monetization tasks through its advanced feature set.
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<h2>Is a new round of industry trends beginning?</h2>
Cinda Securities believes that AppLovin's continued outperformance indicates the effectiveness of its marketing business model driven by the AI recommendation engine AXON, with advertisers willing to pay higher prices for better advertising results, and the company's revenue can cover the costs of computing power invested in AI.
The effectiveness of AI-optimized marketing has been validated, and whether for large media like Meta and Google or smaller media like AppLovin, there is potential to continue driving the development of AI marketing.
Cinda Securities states that the business model of AI applications has been certified, and revenue covering token costs is a prerequisite for the industry to be willing to invest, as well as a prerequisite for the prosperity of AI applications. Hardware companies are accelerating the implementation of AI models and applications, while the emergence of applications is expected to bring new demand for hardware. With the optimization of B card departments, inference, and model optimization, inference costs are expected to decrease significantly, and various forms of AI applications are gradually expected to meet the conditions for emergence.
This article is mainly based on Cinda Securities' research report on November 18, titled &#34;Media Industry Special: What Exactly is AI Application Driving Up?&#34;, original author: Feng Cuiting (S1500522010001)

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The stock price of the US AI advertising marketing company AppLovin has increased by 650% year-to-date, with a 46% surge in Q3 performance. Cinda Securities pointed out that the rapid development of AI applications and the reduction in inference costs will drive the emergence of more AI applications. AppLovin helps advertisers achieve automated marketing and increase revenue through its AI recommendation engine AXON. Other related companies such as Shopify and Duolingo have also recorded significant gains, demonstrating the potential for the commercialization of AI advertising

- The narrative in the tech sector is shifting from hardware to software applications, highlighted by AppLovin's Q3 performance, which saw a 46% stock surge and a 650% increase year-to-date.  
- AppLovin's AI recommendation engine, AXON, significantly boosted its software platform revenue to $835 million, reflecting a 66% year-on-year growth, validating the commercialization of AI advertising.  
- As hardware companies accelerate AI model deployment, the emergence of various AI applications is expected to create new demand, with effective marketing strategies driving revenue growth across the industry.

What exactly is rising in AI applications? Everything starts with the surge of Applovin