CICC: Currently, capital expenditures of North American CSP manufacturers are still in a rapid growth stage.

CITIC Securities believes that the capital expenditures of North American CSP manufacturers are still in a rapid growth stage, with an optimistic outlook. Currently, the penetration rate of large AI models is still relatively low, and the development of large models is still in the early stages. The industrialization cycle has just begun, and the investment in computing power brought by large models is flourishing. Capital expenditures will increase with the growth of large model income, and the ceiling for investment can be very high. In the short term, the rise in AI computing power sectors such as optical modules is driven by factors such as rumors of additional orders, third-quarter performance expectations, and the easing of Sino-US relations. As expectations materialize, and with the existence of the situation where "demand is optimistic but supply may be insufficient," the sector may experience some volatility adjustments. However, this does not mean that the industry's prosperity trend is ending. From a medium-term perspective, it is still recommended to continue to pay attention to the AI sector. On one hand, it is recommended to continue to focus on the AI computing power sector, including core companies in the North American computing power industry chain and the domestic computing power industry chain. On the other hand, it is also recommended to pay attention to the AI application sector, including the progress of edge AI, such as IoT module companies.