Hualong Securities: AI industry continues to be in a high state of prosperity, further establishing the turning point of industry recovery.

Huolong Securities released a research report stating that, driven by the AI industry, industry demand has shown significant recovery, performance continues to improve marginally, and the inflection point of recovery may be further established. Policy guidance combined with external uncertainties is expected to continue to boost domestic demand for technology. The industrial software, financial technology, and network security sectors all show varying degrees of performance recovery, and demand is expected to further stimulate. Maintain a "buy" rating for the computer industry, and recommend focusing on Dawning Information Industry (603019.SH), Semitronix Corporation (301095.SZ), Beijing Compass Technology Development (300803.SZ), Asiainfo Security Technologies (688225.SH), among others. Huolong Securities' main points are as follows: In H1 2025 and Q2 2025, the overall revenue of the computer industry showed double-digit year-on-year growth, with profit growth outperforming revenue growth, and the inflection point of industry performance recovery was further established. Revenue side: In H1 2025, the total revenue of listed companies in the computer industry reached 610.489 billion yuan, an increase of 11.89% year-on-year, maintaining stable growth overall; in Q2 2025, single-quarter total revenue reached 329.588 billion yuan, an increase of 8.51% year-on-year. Profit side: In H1 2025, the total net profit of listed companies in the computer industry reached 12.582 billion yuan, an increase of 28.38% year-on-year, higher than the revenue growth; in Q2 2025, the single-quarter total net profit reached 10.584 billion yuan, an increase of 14.08% year-on-year, with profit growth for two consecutive quarters. AI industry performance has garnered a priori, and business sentiment is expected to gradually pass down to the downstream. (1) AI computing power: In H1 2025, the revenue and net profit growth of the AI computing power sector were significantly higher than the industry average, showing higher business sentiment, mainly due to the wave of generative AI infrastructure construction. On the revenue side, the total revenue of A-share targets in the AI computing power sector in H1 2025 increased by 31.67% year-on-year, reaching the highest level in nearly five years; in Q2 2025, the single-quarter total revenue increased by 23.30% year-on-year, with continuous growth for two consecutive quarters this year. On the profit side, in H1 2025, the net profit of AI computing power increased by 44.36% year-on-year, accelerating year-on-year growth. In Q2 2025, the single-quarter net profit increased by 45.10% year-on-year, with profit growth for two consecutive quarters this year. Capital expenditure by domestic major companies is expected to continue to increase, and domestic computing power is expected to accelerate into the performance realization period. According to the financial report of Alibaba FY2026 Q1 (Q2 of calendar year 2025), the company's AI demand remains strong, with cloud intelligence group revenue growing by 26% year-on-year, including AI-related product revenue achieving triple-digit growth for the eighth consecutive quarter. In terms of CapEx, Alibaba's capital expenditure was 38.676 billion yuan, a year-on-year growth of 220% (compared to 12.094 billion yuan in the same period last year). At the same time, it maintains its target of investing 380 billion yuan in cloud and AI hardware infrastructure over the next three years. The bank believes that domestic AI chip supply will continue to maintain a balance between overseas and domestic sources, and as overseas supply chain disturbances increase in the future, the share of domestic chip supply is expected to continue to rise. (2) AI applications: The profit growth of the AI application sector is significantly better than the revenue side, and from the mid-year reports of the past five years, the net profit of the sector experienced three consecutive periods of year-on-year decline, showing initial signs of recovery in this year's mid-year report. On the revenue side, the total revenue of the AI application sector in the computer industry in H1 2025 increased by 11.36% year-on-year, with a significant acceleration in growth; in Q2 2025, the single-quarter total revenue increased by 10.51% year-on-year, with positive revenue growth for four consecutive quarters. On the profit side, the total net profit of the above-mentioned targets in H1 2025 increased by 170.59% year-on-year, achieving high growth on a low base; in Q2 2025, the single-quarter net profit achieved high growth on the low base of the same period last year. The industrial software, financial technology, and network security sectors all show varying degrees of performance recovery, and demand is expected to further stimulate. Geopolitical uncertainties combined with improved availability of domestic software and hardware will further accelerate the process of local substitution; industry informatization transformation and upgrading will generate more demand for software and hardware updates. It is expected that downstream demand in various sub-sectors will continue to be released. Investment advice Driven by the AI industry, industry demand has shown significant recovery, performance continues to improve marginally, and the inflection point of recovery may be further established. Policy guidance combined with external uncertainties is expected to continue to boost domestic demand for technology. Maintain a "buy" rating for the computer industry, and recommend focusing on: (1) AI industry: Dawning Information Industry (603019.SH), Beijing Kingsoft Office Software, Inc (688111.SH), Guangzhou Sie Consulting (300687.SZ), Digiwin Co., Ltd. (300378.SZ), Jiangsu Eazytec Co., Ltd. (688258.SH), Capitalonline Data Service (300846.SZ), Ucloud Technology Co., Ltd (688158.SH), Wondershare Technology Group (300624.SZ), Iflytek Co., Ltd. (002230.SZ), Hand Enterprise Solutions (300170.SZ), iSoftStone Information Technology (301236.SZ), Jiangsu Hoperun Software (300339.SZ); (2) Industrial software: Semitronix Corporation (301095.SZ), Empyrean Technology(301269.SZ), Shanghai Suochen Information Technology (688507.SH), ZWSOFT (688083.SH); (3) Financial technology: Beijing Compass Technology Development (300803.SZ), Hithink RoyalFlush Information Network (300033.SZ), Northking Information Technology Co., Ltd (002987.SZ), Sinodata Co., Ltd. (002657.SZ), Fujian Apex Software (603383.SH); (4) Network security: Asiainfo Security Technologies (688225.SH), Sangfor Technologies Inc. (300454.SZ), Venustech Group Inc. (002439.SZ), Beijing Infosec Technologies Co., Ltd. (688201.SH). Risk warning Domestic construction of computing power is lower than expected; risk of data error in quoted data; AI application landing speed is lower than expected; domestic large model iteration speed is lower than expected; focus on companies whose performance does not meet expectations; policy standards are implemented slower than expected.