Financial reports from overseas cloud vendors Microsoft (MSFT.US), Google (GOOGL.US), and Meta (META.US) show that AI plays a central role in driving revenue growth.
The Zhitong Finance App learned that CITIC Securities released a research report saying that commercialization of AI technology is being implemented at an accelerated pace. Financial reports from overseas cloud vendors Microsoft (MSFT.US), Google (GOOGL.US), and Meta (META.US) show that AI plays a central role in driving revenue growth. Cloud vendors are optimistic about the long-term profit potential of AI and plan to increase investment to accelerate the monetization capacity of AI services, which indicates an increase in demand for computing power clusters and network connectivity. At the same time, Marvell's optimistic expectations for the future prospects of its AI business confirm the future boom in the optical module industry. Furthermore, the Q1 performance of leading optical module manufacturers is also continuing to be fulfilled. It is recommended to focus on leading manufacturers in high-speed optical modules, coherent optical technology, and AEC.
The views of CITIC Securities are as follows:
Overseas cloud giants continue to invest in AI, and future capital expenditure expectations are optimistic.
Last week, earnings reports from overseas tech giants Microsoft, Google, and Meta showed the central role of AI technology in driving revenue growth. Microsoft's smart cloud revenue was 26.7 billion US dollars, +21% year over year. Driven by the AI-supported Azure and CoPilot dual engines, Google Cloud's revenue was 9.6 billion US dollars, +28% year over year. AI services and Google Workspace grew strongly; Meta's revenue of 365 billion US dollars in 2024 Q1, +27% year over year, and AI has begun to empower media and advertising. All cloud vendors are optimistic about the long-term profit potential of AI and plan to increase investment to accelerate AI services and monetization capabilities. Microsoft pointed out that AI demand is currently in short supply. It is expected that capital expenditure will increase sharply every quarter, and that capital expenditure in 2025 will be higher than 2024; Google indicates that future capital expenditure will increase quarterly; and Meta raised the 2024 capital expenditure guideline to 35 billion to 40 billion US dollars.
AI empowers giants to do their main business, and computing power is “investment-revenue”; a virtuous cycle may be formed.
Currently, AI technology is empowering the main business of technology giants, and is expected to cover overall investment in computing power infrastructure in the future, thus achieving a virtuous cycle from investment to revenue to investment. Microsoft: GitHub Copilot has reached 1.8 million paying users, with a quarter-on-month increase of more than 35%; of the Fortune 100, more than 90% are GitHub customers, and revenue has increased by more than 45% year over year; Copilot can currently be used on nearly 225 million computers, doubling the month-on-month increase. Google: On the B-side, Google Cloud provides infrastructure services for 60% of AI startup teams and 90% of industry unicorns; on the C-side, the company launched the paid application Gemini for Workspace and introduced AI to the search page to improve the user experience, which is currently being tested and promoted in the US and UK. Meta: The top 30% of Facebook and 50% of Instagram content and ad postings are driven by AI recommendation systems, and AI is already contributing part of the revenue.
AI drives growth in optical communication demand+rapid iteration, and leading manufacturers continue to deliver results.
Marvell predicted on AI Day that the GPU cluster will rapidly upgrade from kilocalories to 10,000 cards in the future. This will drive the upgrade of the network architecture from the current two or three layers to a more complex structure. At the same time, the AI interconnection rate upgrade cycle has been shortened from 4 years to 2 years. Marvell expressed optimistic expectations for its AI business prospects. Given Marvell's high market share in the optical module DSP field, it provides a reference for the sustainability of future demand in the optical module industry in the future. Recently, manufacturers such as Zhongji Xuchuang, Tianfu Communications, and Xinyisheng have also released Q1 results, all of which have achieved year-on-year high revenue/profit increases, once again confirming the current boom in the optical module industry.
Investment Strategy:
The capital expenditure guidelines and future plans of leading overseas cloud vendors have once again verified the long-term trend of AI development. At the same time, AI is empowering the main business of overseas technology giants. From AI investment to AI revenue, to AI investment, a virtuous cycle may be forming, driving continued investment in future computing power equipment and network equipment. The trend of continuous updating and upgrading of optical communication equipment such as optical modules is also more clear. At the same time, the performance of leading optical module manufacturers is also continuing to be realized, once again confirming the current boom in the optical module industry. It is recommended to focus on manufacturers with leading positions in high-speed optical modules, coherent optics, and AEC.
Risk factors: AI industry development falls short of expectations; demand for new products such as 1.6T falls short of expectations; R&D progress of new solutions/new technologies such as LPO/CPO falls short of expectations; increased market competition; technology path risk; geopolitical risk.