Daiwa: China's AI token price war may reshape industry value distribution; bullish on IaaS-related companies in the short term

Daiwa released a research report stating that since the bank's first coverage in August, the AI Token price index has fallen by about 25%, while the multi-region average composite list prices of OpenAI and Anthropic have dropped by about 31% and 47%, respectively, potentially redistributing value across the AI industry chain. The bank expects that the AI Token price war will slow the annual recurring revenue (ARR) growth of model companies in the short term. At this stage, it prefers companies with contracted revenue protection and exposure to infrastructure-as-a-service (IaaS) businesses, while in the long term it is bullish on the application and distribution segments becoming beneficiaries of low-cost intelligence capabilities. Daiwa pointed out that the significant decline in Token prices mainly reflects the increase in low-priced model tiers and improved inference efficiency, but the shift of workloads to lower-cost models will reduce revenue realized per Token, requiring a substantial increase in usage to offset. The bank believes that recent price cuts may offset a considerable portion of the revenue increment brought by short-term usage growth. In addition, US AI suppliers are gradually narrowing the pricing advantage Chinese models once had and raising the threshold for model capabilities. At present, Chinese models remain price-competitive on average, but no longer hold a firm cost-effectiveness advantage. In terms of stock selection, Daiwa is bullish, in order, on BABA-W (09988), TENCENT (00700), KINGSOFT CLOUD (03896), Z.AI (02513), and MiniMax-W (00100), all rated "Buy." The bank is optimistic about Alibaba's layout combining cloud business, self-developed chips, and model business, as well as Tencent's development through agentic AI products, coupled with its broad distribution channels and cloud business.