Zhitong Hong Kong Stock Analysis | The giants of involution collectively strengthen, AI infrastructure accelerates the rise of intelligent agents

[Market Dissection]

In the first half of the year, China's GDP growth rate of 5.3% was significantly better than last year's 5.0%. The difficulty of achieving the annual target of around 5% is not great. Global stock markets generally rose, with Hong Kong stocks also fluctuating upwards by 1.6%. However, the A-share Shanghai Composite Index performed poorly, mainly due to structural issues.

The formal announcement of sanctions against Russia by Trump has come out. According to CCTV news, on the 14th local time, U.S. President Trump expressed great dissatisfaction with Russia, threatening to impose a 100% tariff on Russia if an agreement is not reached within 50 days regarding Ukraine. He also announced secondary tariffs on countries purchasing Russian oil and declared an agreement with NATO to supply weapons to Ukraine. This seems somewhat inconsequential; the secondary tariffs have some impact, but they also provide a 50-day buffer period. The market views this as another "TACO deal" playing out, thus having little effect on the stock market. Meanwhile, the European Union is preparing to impose counter-tariffs on U.S. goods worth 72 billion euros. This is also a form of self-defense to bolster their own stance, as Europe still hopes to ultimately reach an agreement with the U.S. because the resolution of the Ukraine issue still relies on Trump as the "father figure."

Today's market's biggest feature is that several major giants caught in internal competition have begun to stabilize their positions. On the 15th, the Restaurant Industry Association of Honghuagang District, Zunyi City, issued a proposal calling for food delivery platforms to stop "involution-style" subsidies and unfair competition. The proposal stated that extreme subsidy behaviors initiated by platforms like Taobao Flash Purchase (Ele.me), such as "0 yuan purchase" and "18 yuan off for purchases over 18 yuan," have caused chaos in market order and severely disrupted the industry ecosystem. This has led to a vicious cycle for many local restaurants, where "not participating means no traffic, participating means price-cutting losses," severely impacting many brick-and-mortar stores that rely on dine-in customers. The proposal put forward three initiatives: first, to stop irrational subsidies and return to value competition; second, to protect the legitimate rights and interests of merchants; third, to jointly build a sustainable development ecosystem. Although this level is quite low, the feedback is serious, and it is estimated that higher authorities will mediate. Sheng Laiyun, deputy director of the National Bureau of Statistics, stated at a press conference that in response to the recent intensification of "involution" competition in certain industries and enterprises, the Central Financial Committee held a meeting on July 1 to clearly propose to deepen the construction of a unified national market, focus on key difficulties, and govern enterprises' low-price disorderly competition in accordance with laws and regulations, guiding enterprises to improve product quality and promoting the orderly exit of backward production capacity. Although no giants were named, the signal has been released. Today, Alibaba (09988) surged nearly 7%, Meituan (03690) and JD.com (09618) rose over 4% and 2% respectively, while Tencent (00700) and Kuaishou (01024) also rose by 3.5% and 4.44% respectively.

The strength of the U.S. stock market largely relies on NVIDIA, and the new catalyst is that the U.S. has approved the sale of H20 chips to China. It is highly likely that Jensen Huang has persuaded Trump to adopt a more pragmatic approach, as it is impossible to completely block it; it is better to quickly dump lower-version chips. At the same time, this indirectly plays a certain role in containment. Therefore, NVIDIA's strength has stimulated the development of related AI hardware, with PCB-related companies being the main beneficiaries, such as Jiantao Laminates (01888), which rose nearly 5% as one of the top stocks in July by Zhitong The AI infrastructure in the United States is also booming. Trump plans to officially announce a total investment of $70 billion in artificial intelligence and energy at an event in the suburbs of Pittsburgh, Pennsylvania, on Tuesday. These investments will come from multiple companies and will cover the construction of new data centers, expansion of power generation capacity, upgrades to grid infrastructure, as well as related AI training programs and apprenticeship schemes. Meta will invest hundreds of billions of dollars to build the world's largest data center. The U.S. continues to increase its computing power investment, and China will inevitably follow suit, with computing power stocks such as GDS Holdings Limited (09698) and New Horizon Health (01686) rising over 12% and 7%, respectively. Fiber optic companies like Yangtze Optical Fibre and Cable Joint Stock Limited Company (06869) also benefited, rising over 4%.

In addition, Meta is discussing whether to abandon open source and shift to closed source. This means that the advantages of China's open-source DeepSeek will further widen, highlighting the advantages of AI applications based on this foundation. On July 14, 2025, the World Digital Academy (WDTA) will officially release the AISTR series of new standards for "AI Agent Operational Safety Testing Standards" at the United Nations headquarters in Geneva. The release of this standard and the realization of B-end applications will have a positive impact on companies and industries related to AI agents. Today, related stocks such as Meituan Dianping (02556), AsiaInfo Technologies (01675), Kingdee International Software Group (00268), Mingyuan Cloud (00909), Fourth Paradigm (06682), and Yidu Tech (02158) all rose over 5%. The development of various agents will inevitably drive the rapid growth of cloud services. Kingsoft Cloud (03896): The demand for GPU computing power for model training from Xiaomi and Kingsoft Software will allocate most of the AI computing expenses to Kingsoft Cloud, supporting its business development. Today, it surged over 16%. Meanwhile, Wisesoft (00856) also caught the AI wave, and the company announced that it has begun cooperation discussions to explore stablecoin payment and settlement solutions. It also jumped on the stablecoin concept, showing a strong recent performance, surging over 11% today.

In the Apple supply chain, new news has emerged. Tianfeng's Guo Minghao's latest industry survey shows that to ensure mass production of the foldable iPhone in the second half of 2026, Apple will adopt Samsung Display's (SDC) wrinkle-free display design. UBS stated that the initial pricing of the Apple phone may be in the range of $1,800 to $2,000, with initial production expected to be limited to 10 to 15 million units. Reports indicate that the foldable iPhone in 2026 will be exclusively manufactured by Foxconn, with the first shipment expected to be between 8 million and 10 million units, and plans to increase to 20 million units in 2027. FIH Mobile Limited (02038) rose over 7%. It is reported that the MIM components for Apple's foldable screen hinge are being developed simultaneously by four companies, including Tongda Group (00698), which rose over 6% today. Other companies in the Apple supply chain, such as GoerTek (01415) and AAC Technologies (02018), also rose over 5%.

The enthusiasm for innovative drugs remains high. On July 11, the adjustment of the national basic medical insurance drug list for 2025 was initiated. The key point is that this year marks the first time that the innovative drug list for commercial health insurance has been added, synchronized with the adjustment of the basic list. The newly added commercial insurance innovative drug list provides strong support for new drugs with high clinical value but payment bottlenecks Leading varieties such as China Biologic Products Holdings (01177), BeiGene (06160), Rongchang Biologics (09995), and Innovent Biologics (01801) have all seen significant increases, along with Chuli Medical (01858), Hansoh Pharmaceutical (03692), and Livzon Pharmaceutical (01513), which have been stimulated by a new round of centralized procurement.

【Sector Focus】

According to Shangguan News, the first China International Game Developers Conference (CIGDC) is set to be held at ChinaJoy at the end of July. The conference will release the corporate overseas expansion guidelines "One Country Pass," with the first batch covering five countries: Japan, South Korea, the UK, France, and Finland, providing a basis for Shanghai gaming companies to formulate overseas expansion plans. Additionally, a Shanghai "Game Overseas Research Center" will be established to create a mechanism for sharing overseas policy and regulatory information, improve the overseas risk early warning mechanism, and assist companies in dealing with geopolitical and compliance risks.

The market share of Chinese mobile games overseas has increased from 22% in 2018 to 28% in 2024, with Chinese manufacturers expected to occupy 12 of the top 16 spots in the list of new top games launched in 2024.

Main varieties: Tencent (00700), NetEase (09999), Kingsoft (03888), Bilibili (09626), and NetDragon (00777).

【Stock Picking】

Changfei Fiber Optic Cable (06869): Continuous Layout in Overseas Markets, Accelerating Fiber Optic Industrialization

In the first quarter of 2025, Changfei Fiber Optic achieved total operating revenue of 2.894 billion yuan, a year-on-year increase of 21.23%; net profit attributable to the parent company was 152 million yuan, a year-on-year increase of 161.91%; and net profit excluding non-recurring items was 43.2486 million yuan, a year-on-year increase of 77.07%.

Commentary: In addition to significant revenue growth, the company continues to expand in overseas markets, with overseas business revenue increasing from approximately 398 million yuan in 2014 to approximately 4.121 billion yuan in 2024, accounting for 33.79% of total revenue. In the Philippines, Changfei has helped deploy over 7,000 kilometers of optical cables and build more than 1,600 base stations, covering a population of 2.7 million and pushing the country's network penetration rate to 73.6%; in Indonesia, it has assisted in deploying over 14,000 kilometers of optical cables, covering more than 1.1 million households in over 70 cities; in Peru, it has undertaken the national broadband project, helping install over 9,800 kilometers of optical cables and commissioning more than 1,500 base stations, serving over 1 million people. The industrialization of fiber optics is accelerating. The company's G.654.E fiber optic technology has achieved global leadership, with the largest market share and deployment scale exceeding one million core kilometers. Changfei's multi-core fiber technology is also noteworthy, having conducted on-site tests in collaboration with China Mobile and China Unicom; it successfully carried out the country's first multi-core fiber solution pilot for data centers in Tianjin. In the smart car sector, Changfei has launched an "All-Optical Intelligent Vehicle" solution, including a 50Gbit/s onboard optical communication system, erbium-yb co-doped fiber amplifiers for lidar, and distributed fiber battery monitoring technology. In 2024, it partnered with Dongfeng R&D Institute to complete environmental adaptability verification for onboard quartz optical fibers, conducting the world's first real vehicle road test over 12,000 kilometers. Since its establishment in 1988, Changfei has produced and delivered over 1.1 billion core kilometers of optical fibers, serving a global population of 3 billion and pushing the global optical fiber broadband penetration rate to 47.3% In terms of hollow core optical fibers, Yangtze Optical Fibre and Cable Joint Stock Limited Company has completed pilot tests with the three major domestic operators and is conducting collaborative tests with several equipment manufacturers and internet companies, with relevant indicators being globally leading. Leading companies in the industry have also reported positive progress. Driven by demand for artificial intelligence and better product combinations, the company's revenue and profits are expected to reach a turning point