According to the Zhitong Finance APP, CITIC Securities has released a research report stating that the attractiveness of Chinese AI assets is gradually becoming apparent, and leading AI companies are expected to gain performance-driven alpha investment opportunities. The valuation of leading AI companies still has a significant comparative advantage relative to comparable companies in the United States. Once the U.S. tech stocks face dual pressure on performance and valuation due to a slowdown in CAPEX growth, the attractiveness of Chinese assets is expected to further emerge. The firm expressed a long-term optimistic view on the revaluation and growth potential of Chinese technology and even broader assets, especially after the significant valuation pressure caused by the China-U.S. competition in 2018. In the future, every major technological breakthrough and application landing has the potential to bring about systemic valuation increases. Key investment opportunities are focused on domestic large models and intelligent cloud, China's AIDC, domestic computing power processes, intelligent driving, AI agents, and embodied intelligence.
<h2>The main points of CITIC Securities are as follows:</h2>
Report Origin: DeepSeek has sparked high attention, and investors are concerned about how far the revaluation of Chinese technology assets can go. DeepSeek has triggered a &#34;butterfly effect&#34; with its excellent performance, significantly reduced costs, and open-source ecosystem.
DeepSeek registered over 100 million users in just 7 days, breaking the record of 2 months set by ChatGPT. Currently, DeepSeek's daily active users have surpassed 30 million, making it the most popular AI large model globally, prompting a revaluation of Chinese AI assets.
Reviewing the revaluation of U.S. tech companies brought about by the launch of ChatGPT: From the beginning of 2023 to date, the Nasdaq has risen by 100%, with leading company NVIDIA's stock price increasing by 8.5 times, entering the top three globally in market capitalization. Companies like Palantir and Applovin have also surged, rising 17.6 times and 47.4 times, respectively, during the same period, widening the valuation gap between Chinese and U.S. tech stocks. Since January, the stock prices of leading companies such as Alibaba, SMIC (688981.SH), BYD (002594.SZ), and Xiaomi Group have increased by 51%, 43%, 37%, and 30%, respectively. IDC and cloud infrastructure companies have also seen significant gains, and the valuation gap between Chinese and U.S. tech companies has begun to narrow. DeepSeek, on its own, has changed the expectation of &#34;U.S. AI's cliff-like lead,&#34; thereby altering global investors' judgments on the value of Chinese technology assets. The breakthrough of this startup, founded in July 2023 with only over 100 employees, is a reflection of China's technological innovation power against the backdrop of the prolonged China-U.S. competition since 2018. The firm believes that we are still in the early stages of the AI era and at the beginning of the revaluation of Chinese technology assets.
Industry Impact: DeepSeek brings AI equality, changes the global technology landscape, increases demand for computing power, and ignites expectations for application explosions.
Under conditions of limited computing power, DeepSeek was the first to replicate GPT-01, achieving performance in mathematics, code, and natural language comparable to GPT-01, independently developing open-source RL-Scaling technology. The V3 version utilizes innovative architectures such as MoE and MLA, along with changes in training strategies, to achieve low-cost and efficient training. According to the DeepSeek-R1 documentation, its pre-training cost is nearly less than $6 million. The R1 version explores the transition from supervised fine-tuning (SFT) to zero-shot fine-tuning, combining GRPO and an efficient reward system to significantly reduce costs while achieving performance improvements
DeepSeek breaks the monopoly advantage of the United States in AI competition, and AI equity will change the global technology industry landscape, igniting expectations for an application explosion.
Currently, AI applications are on the eve of an explosion, with computing power demand set to initiate first. Companies like ByteDance's Doubao and Alibaba's Tongyi Qianwen are expected to quickly follow up with innovations, leading to a flourishing of specialized models.
The race among model companies brings about a &#34;pulse-like&#34; growth in training computing power demand; inference computing power demand and the local deployment needs of large enterprise models are also growing rapidly. The firm is optimistic about investment opportunities in AI cloud computing, AIDC data centers, AI chips, and high-end manufacturing companies. On the application side, scenarios such as intelligent driving, AI advertising, AI agents, AI smartphones, and embodied intelligence are expected to gradually materialize.
Application Outlook: The future of AI lies not only in pursuing more powerful models but also in solving real-world problems and creating economic value through AI applications.
From technological innovation to application landing, from changing expectations to creating value, from local low-quality competition to global high-quality development, Chinese technology companies still have a long way to go. Currently, American model companies still significantly lead, maintaining strong advantages in cutting-edge fields such as multimodal, world models, and reinforcement learning. Looking ahead, the United States will continue to raise the technical ceiling of AI, while China's greater opportunity lies in integrating AI technology with traditional industry foundations to solve practical problems and create economic value.
The firm predicts that applications in fields such as intelligent driving, AI advertising, and AI agents will land first, contributing to revenue growth and changing the market landscape starting in 2025. The innovations of Apple's iPhone 17 in the third quarter are noteworthy, as AI phones may bring a new wave of edge-side intelligent opportunities, with local models like Alibaba's Tongyi Qianwen expected to participate. Embodied intelligence benefits from China's solid manufacturing base and is expected to become another advantageous industry for China. From an industry application perspective, AI + Internet, AI + Finance, AI + Healthcare, AI + Industry, and AI + Transportation are expected to land first. From a business chain perspective, AI + Auditing, AI + Regulation, and AI + Research are expected to significantly enhance operational management efficiency. In the distant future, the deep connection and mutual influence between the physical and digital worlds may accelerate the arrival of the metaverse.
Revaluation Logic: R&amp;D spending in the technology sector shifts from &#34;negative valuation&#34; to &#34;positive valuation.&#34;
In the post-pandemic era, Chinese technology assets remain undervalued, mainly due to: 1) Slowing profit growth, leading to insufficient investor confidence in core profit growth; 2) Chinese AI being perceived as &#34;generationally behind,&#34; with new business &#34;R&amp;D investment&#34; understood as &#34;losses&#34; that erode valuations. In recent years, Chinese tech giants have often been valued using overall PE ratios, and losses from new business R&amp;D have thus been reflected in negative valuations in total market capitalization. The pressure on core profit growth has exacerbated the valuation divergence between Chinese and American tech giants. The revaluation brought by DeepSeek, on the surface, appears to increase the PE valuation multiples of leading companies, but at a deeper level, it signifies a shift of Chinese AI assets from negative to positive valuation. In the future, if there is an improvement in economic expectations, there is room for an increase in core business valuation multiples;
Once AI business achieves significant revenue contributions, a transformation in PS segment valuation is also expected. The bank assesses that the revaluation of Chinese technology assets is still in its early stages. In the future, every major technological breakthrough and application landing has the potential to bring about systemic valuation increases. However, experiences from the PC and mobile internet waves indicate that even within a major technology cycle, there will be twists and turns; the experience of AI asset revaluation in the U.S. stock market also shows that sustained valuation increases require performance verification quarter by quarter.
Investment Opportunities: Chinese AI assets primarily recommend the internet, focusing on computing power, domestic chip manufacturing processes, intelligent driving, and AI agents.
China's AI is accelerating iteration, and domestic large models and intelligent cloud companies are expected to benefit significantly. The internet is not only an important landing scenario for AI, such as WeChat integrating DeepSeek, accelerated landing of AI advertising, and increased demand for AI content generation; it is also a provider of intelligent cloud and domestic large models. Under the grand narrative of Chinese AI, the revaluation of internet companies will continue, but the sustainability of this revaluation depends on the quarterly verification of leading companies' performance. In terms of computing power, similar to NVIDIA's position in the U.S. stock asset revaluation over the past two years, SMIC will play a crucial role in the revaluation of Chinese technology assets in the next 1-2 years. SMIC's pricing power, revenue growth rate in advanced processes, and profitability are expected to become important directional guidance for the market. On the application side, intelligent driving is expected to achieve a doubling of penetration rates by 2025, as the Chinese automotive industry begins to explore globalization. Traditional enterprises are starting to attempt local deployment of DeepSeek, accelerating the application landing of AI large models, with AI + finance, AI + healthcare, AI + industry, AI + transportation, and other fields worth paying attention to; AI agents are expected to become an important form of application landing. In addition, AI is expected to feed back into the digital upgrade of industries, bringing performance opportunities for sensor, PC, server, and IT service companies.
Risk Factors:
Risks of escalating geopolitical tensions and frictions; risks of macroeconomic growth not meeting expectations; risks of AI application landing speed not meeting expectations; risks of leading tech companies' future quarterly performance not meeting expectations, etc

CITIC Securities released a research report indicating that the attractiveness of Chinese AI assets is gradually emerging, and leading AI companies are expected to gain performance-driven alpha investment opportunities. Compared to comparable companies in the United States, leading Chinese AI companies have a significant valuation advantage. As U.S. tech stocks face performance and valuation pressures, the attractiveness of Chinese assets will further increase. The report emphasizes the need to focus on investment opportunities in domestic large models, intelligent cloud, and other fields, and points out that the success of DeepSeek has triggered a revaluation of Chinese tech assets

- CITIC Securities reports that the attractiveness of Chinese AI assets is becoming evident, with leading AI companies poised for performance-driven investment opportunities.  
- The valuation of top Chinese AI firms remains advantageous compared to their U.S. counterparts, and as U.S. tech stocks face pressure, the appeal of Chinese assets is expected to grow.  
- The report highlights the potential for systematic valuation increases with each major technological breakthrough, particularly in areas like domestic large models, intelligent cloud, and AI applications.

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CITIC Securities: Leading AI companies have attractive valuations, and we are optimistic about the long-term growth potential of Chinese technology assets