Embracing AI Wave: Accelerating Computational Power Industry
With the arrival of a new wave of AI, AI applications continue to deepen, and the global demand for computing power is experiencing explosive growth, driving the rapid development of the computing power industry. Companies involved in the AI wave, including AI server manufacturing, PCB (Printed Circuit Board), high-speed interconnection, and optical modules, are accelerating their participation in this AI wave, with many companies achieving significant performance growth. Many institutions believe that as AI continues to evolve, the demand for AI computing power will continue to grow, and the industry chain will continue to maintain a high level of prosperity.
AI wave boosts segment performance
Looking at the semi-annual report data for 2024, the computing power industry chain has delivered an impressive report card for the first half of the year. Wind data shows that among the 53 listed companies in the AI computing power concept segment, 34 achieved profitability in the first half of this year, and 31 had a positive year-on-year increase in net profit attributable to the parent company, accounting for 64.15% and 58.49% respectively. Among them, companies such as Jingjia Micro, Hengwei Technology, and Zhongji Xuchuang achieved a year-on-year increase in net profit attributable to the parent company of more than 100% in the first half of the year. The net profit attributable to the parent company of companies such as Industrial Fuxin, Zhongji Xuchuang, Baoxin Software, and Ziguang Shares all exceeded 1 billion yuan. In addition, companies such as Tongfu Microelectronics and Chaoxun Communication turned losses into profits in the first half of the year.
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According to the semi-annual report information of listed companies, the new wave of AI has become an important driving force for the growth of listed companies' performance.
"The growth in performance during the reporting period is mainly due to the development of global artificial intelligence AI technology and the increase in computing power demand. The construction of global data centers has driven the continuous and stable growth in demand for high-speed optical device products, promoting the performance growth of the company's active and passive product lines." Tianfu Communication stated in its semi-annual report. The company achieved a net profit attributable to the shareholders of the listed company of 654 million yuan in the first half of the year, a year-on-year increase of 177.20%.
Hengwei Technology achieved a business income of 636 million yuan in the first half of the year, a year-on-year increase of 99.42%, and a net profit attributable to the shareholders of the listed company of 71.7357 million yuan, a year-on-year increase of 325.79%. Among them, the company's intelligent system platform business achieved a business income of 451.2631 million yuan, a year-on-year increase of 141.34%. This was mainly due to the company's active expansion of intelligent computing-related businesses, the gradual implementation and revenue generation of intelligent computing integrated machines and servers, and the promotion of business income growth.
Driven by domestic demand and the AI industry, domestic chip manufacturers represented by Higuang Information have also shown strong commercial potential. Among them, Higuang Information, the leader in domestic CPUs (general-purpose processors) and DCUs (co-processors), achieved a year-on-year revenue increase of 44.08% in the first half of this year, with both revenue and net profit attributable to the parent company in the second quarter reaching the highest in a single quarter in history. Against the backdrop of the development of generative AI (AIGC), Higuang DCU has become the main force of domestic AI computing power and has been scaled down in fields such as artificial intelligence, big data processing, and commercial computing, widely used for the training and inference of large models.
"With the rapid development of AI large models and generative AI technology, the market demand for computing power has increased exponentially, bringing huge market opportunities for computing power infrastructure providers and related enterprises." Shu Di, the chief analyst of the electronic industry at Guotai Junan, said that the widespread application of AI has led various industries to explore new application scenarios, requiring strong computing power support, providing new business opportunities for related enterprises.
Geng Chen, the deputy director and chief electronic analyst of Huachuang Securities Research Institute, also said that the rise of generative AI has become the core driving force of this round of AI waves. The demand for computing power has risen sharply, promoting the expansion of the entire computing power industry chain. The demand for high-performance computing (HPC), cloud computing, and edge computing in the fields of hardware, software, and services has exploded, bringing new growth points for semiconductor companies, data centers, and cloud service providers. Specialized AI chips have become the focus of the industry, forming a new round of technological competition, providing stronger technical support for downstream industries. Governments and enterprises in the global market are heavily investing in AI infrastructure, bringing more cooperation and expansion opportunities for chip manufacturers, equipment suppliers, and cloud service providers.
Listed companies are competing to increase layout investmentAs AI model scales expand and applications are implemented, the global demand for computing power is experiencing explosive growth. Coupled with a succession of favorable policies, the computing power industry is developing rapidly, with both enterprises and governments increasing their investments and actively planning in areas such as AI computing power and AI chips.
IDC forecasts that the global AI computing market size will grow from $19.5 billion in 2022 to $34.66 billion by 2026; among these, the AIGC computing market growth rate is far ahead, with an expected CAGR (Compound Annual Growth Rate) of over 90% from 2022 to 2026. Downstream demand will also drive the increase in AI servers, with the global AI server market expected to reach $34.7 billion by 2026, accounting for 21.7% of the entire server market, and the Chinese market is projected to reach $12.337 billion.
This year, several A-share companies have invested substantial funds to increase AI computing power investments, with investment scales ranging from hundreds of millions to billions of yuan.
On May 7th, Huatong Emergency announced that the company plans to invest 1 billion yuan to develop intelligent computing power services, earning profits by providing high-end computing resource leasing and value-added technical services to customers; on April 22nd, Jinlong Shares announced that the company plans to cooperate with Safeview Jianxin and Jiuzhang Yunji to establish a project company to jointly develop and operate an intelligent computing center in the Guangdong region, with a total investment of no more than 1 billion yuan; on March 29th, Zhongbei Communication disclosed that the company plans to invest in the construction of the "Qinghai Sanjiangyuan National Green Intelligent Computing Power Scheduling Platform Project", with a total project investment of about 1 billion yuan.
AI and computing power have also become important investment and planning directions for domestic technology giants and industry leaders. In the 2023 annual report, Baidu CEO Robin Li stated that the company will continue to firmly invest in generative AI and foundational models, laying the foundation for gradually creating new growth engines.
AI is also a key focus of the current layout for the three major telecommunications operators. China Mobile's semi-annual report shows that the company fully embraces the AI era and vigorously promotes the "AI+" initiative. Next, the company will continue to improve its systematic AI development model, focusing on expanding the "AI+" scale effect. On one hand, the company will systematically enhance the supply capabilities of large computing power, big data, and large models, solidifying the foundation for "AI+" development; on the other hand, it will enrich the "AI+" service model, promoting AI's innovative application on a larger scale and at deeper levels, assisting various industries in "smart transformation, digital transformation, and network integration."
"As digital technology, especially AI technology, accelerates its development, the next decade will bring about a reshaping of productivity and a transformation of efficiency, empowering high-quality development of society and the economy. Faced with the technological wave triggered by new intelligent technologies, ZTE will continue to strengthen core technology innovation and accelerate the expansion of 'connection + computing power + capability + intelligence'." The communication equipment leader ZTE stated in its semi-annual report.
Geng Chen analyzed that in recent years, with the explosive development of AI computing power demand, domestic computing power hardware industry chain-related companies have accelerated their layout and ushered in a stage of rapid development. In terms of hardware, domestic-related enterprises mainly focus on two industrial mainlines: one is actively participating in the construction of the global AI industry chain, with strong industrial advantages in certain segments, represented by AI server manufacturing, PCB, high-speed interconnection, optical modules, etc., which have deeply participated in the global computing power construction wave and have a certain say; the other is domestic leading enterprises in core computing power chips, with the research and industrialization of domestic AI chips continuously accelerating. Currently, domestic AI chips are continuously iterating and upgrading, narrowing the performance gap with the core products of global leading enterprises, achieving scale sales and extensive market recognition.
Shu Di said that in terms of investment layout related to computing power, domestic enterprises have fully laid out in several computing power industry chain segments such as server systems, chips, heat dissipation, and optical modules, with domestic computing power products continuously improving in performance, service response speed, data security, and other aspects.
The computing power industry chain is expected to maintain high prosperity.The development of the AI industry is predicated on the advancement of computing power. Multiple institutions believe that with the acceleration of global digital transformation, the advancement of China's integrated computing power network and the "East Data West Computing" project, the demand for AI computing power will continue to grow. The prospects for the domestic computing power industry are broad, the industry chain will continue to maintain high prosperity, and related companies will fully benefit.
Geng Chen analyzes that as AI applications continue to be implemented, the focus of computing power construction will also shift from primarily supporting training to increasingly supporting inference. Minutes from NVIDIA's performance meeting show that 40% of the company's data center revenue in fiscal year 2024 comes from inference business. As training models become more refined and mature, and models and application products are gradually put into production, the proportion of AI servers on the inference side will also rise. According to Schneider Electric's calculations, by 2028, the inference load of artificial intelligence is expected to account for 85%. "When investors consider investing in the computing power industry chain, they should closely monitor technological development, market demand, policy support, and the core competitiveness of enterprises. They should also pay attention to the competitive situation and potential risks in the industry chain," Geng Chen said.
Shu Di also clearly stated his optimism for the subsequent development of the computing power chain. On the one hand, due to the uncertainty of changes in the international environment, the research and development and application of domestic computing power products are accelerating. As dependence on external technology decreases, the competitiveness of domestic enterprises in the fields of chips, servers, optical modules, etc., is continuously increasing, and more and more large model and AI application companies are beginning to choose domestic computing power products. On the other hand, the domestic emphasis on the computing power industry continues to strengthen, and relevant policies are continuously introduced, which will provide protection for the rapid development of the computing power industry. It is recommended to focus on policy orientation, focus on enterprises with core competitiveness in the computing power chain, and layout changes and investments in the sub-market. He believes that the computing power chain will undergo significant changes with each iteration of chips, and investors should pay attention to opportunities in different sub-markets, such as AI chips, servers, optical modules, and liquid cooling technology. Enterprises in these fields have strong growth potential in terms of technological innovation and market demand.
"Looking forward, the global AI wave continues, the investment in computing power infrastructure continues, and we look forward to the market opportunities brought by subsequent product iterations and upgrades (such as the upgrade of optical module rates) and the popularization of more inference applications. It is expected that AI core direction-related targets will still become companies with eye-catching performance growth," said Tianfeng Securities analysis.