Since April, Hong Kong stocks have seen a relatively rapid rebound.

The Hang Seng Index maintained an upward trend for four consecutive weeks, and this week set a new record for the year, reaching 19602.24 points. This is the first time since nine months ago that it has broken the 19,000 mark.

As for predicting the future trend of Hong Kong stocks, macro analyst Hong Hao is optimistic about the future trend of Hong Kong stocks. He pointed out that if the Hong Kong Stock Connect dividend tax relief policy currently circulating is confirmed, the overall valuation of Hong Kong stocks is expected to increase by at least 30%. This will not only attract more capital inflows, but will also further boost market confidence and drive up stock prices.

1. Beta upgrade in the technology sector can be expected

CICC said that Hong Kong stocks have been rising continuously for many days. On the one hand, economic fundamentals have improved while favorable Hong Kong stock policies are spreading frequently. On the other hand, the improving capital environment is also an important factor driving the rise in Hong Kong stocks. At the same time, Southbound capital was very active. The net purchase amount reached HK$32.937 billion in the 11 trading days since May, and the total net purchase amount for the Southbound reached HK$246.447 billion during the year.

The technology sector is the top priority for southbound capital. The valuation level has risen with the inflow of incremental capital, but due to prolonged adjustments and low allocations in the early stages, sector valuations are still highly cost-effective. Among them, the AI theme is receiving a lot of attention in Hong Kong stocks. This is similar to A-shares, but it is quite “cost-effective” compared to A-shares. For example, AI's second IPOs, AIGC's first share — when you go out and ask, its PS valuation has just passed double digits, so the room for beta growth is worth looking forward to.

Not only can beta improvements be expected, but Alpha is also highly attractive — the rapid iteration of basic large-scale model technology and rapid cost reduction have a very positive effect on the implementation and even profit of AI manufacturers, bringing opportunities for AI-themed beta and alpha resonance.

Recently, the price war in the field of basic large models has officially started, marking the industry's entry into the “era of percent price”. According to media reports, Ali's Tongyi Qianwen GPT-4 main model, the API input price dropped from 0.02 yuan/thousand tokens to 0.0005 yuan/thousand tokens, a drop of as much as 97%. In addition, Open AI launched GPT-4O in April. While achieving great progress in the multi-modal AI model, the price was also drastically reduced. The input price per million tokens was reduced from $10 to $5, the output price was reduced from $30 to $15, and the API call cost was cut in half.

In the development process of the technology industry, cost reduction is generally regarded as a key factor in the rapid increase in technology penetration. Comparing the basic model to “flour,” the basic ingredient for making bread, AI manufacturers are equivalent to “bread makers.” The decline in the price of “flour” will have two direct effects on “bread makers”: (1) providing more room for price adjustment, enabling AI manufacturers to adjust product prices and promote the popularization and application of products, that is, leading to “volume growth”; (2) directly affects the profit margins of AI manufacturers and increases profit margins.

Whether it is “volume increase” or “profit increase,” or “volume” and “profit” resonance, it has brought profit elasticity to AI manufacturers. Compared to companies that started late and are still in the exploration phase, AI companies that already have a more mature profit model and commercialization path have a stronger alpha promotion logic.

The outing question mentioned earlier in the article is one of the few profitable AI companies in China.

II. Focus on growth stocks with strong certainty

According to disclosed data, the revenue from going out and asking has continued to grow in recent years. Revenue for the 2021, 2022, and 2023 fiscal years was 397.9 million yuan, 500.2 million yuan, and 507.1 million yuan respectively, and adjusted profit for 2023 was 17.535 million yuan.AI software solutions are the company's core business. Its revenue grew from 595.19 million yuan in 2021 to 343 million yuan in 2023, an increase of 476.70%. Among them, from 2021 to 2023, revenue from AIGC solutions increased from 6.822 million yuan to 118 million yuan, an increase of more than 16 times; revenue from AI enterprise solutions increased from 52.697 million yuan to 226 million yuan, an increase of 328.19%.

The company's AI business grew rapidly and became profitable early, inseparable from the first-mover advantage.

Go Out and Ask is one of the earliest AI companies to start in China, and one of the first market players in China to focus on developing big models.

Its founding team has a rich technical background and outstanding ability to innovate. Li Zhifei, the founder of the company, worked in the industry at the US Silicon Valley Research Institute and specialized in NLP (natural language processing) at Google. He is “the first scientist from Google Research to return to China to start a business,” and he is also one of the earliest scientists to return to China to start a business from a major Silicon Valley factory.

Given the founder's academic background and practical experience, Go Out and Ask has focused on generative AI and voice interaction technology since its inception. After more than ten years of intensive cultivation, by adhering to the “trinity of technology, product, and commercialization”, the company is ahead of the industry. It has built a complete ecosystem and a complete “end-to-end” human-computer interaction-related technology stack, covering AIGC solutions, AI enterprise solutions, and smart devices, and has become one of the few companies that simultaneously serve three different groups of consumers, enterprises, and creators.

At present, many of the company's products have great influence in various fields. For example, what the company is most familiar with is its phenomenal AIGC product “Magic Sound Workshop”. Currently, many popular videos on short video platforms use “Magic Sound Workshop” for dubbing. As one of the earliest market participants in China to focus on developing big models, Go Out and Ask has successfully developed the big model 'UCLAI' in 2020, and has developed vertical optimization technology modules based on it, as well as AIGC technology and applications for creators and enterprises. In 2023, the company released the multi-modal large model “Sequence Monkey”, further consolidating its leading position in the AI field.

According to the Insight Consulting Report, based on the 2022 revenue scale, the market share of AIGC solutions that go out and ask is the highest among Chinese market participants, which fully proves the company's market position and influence in the industry.

However, past results are only a prelude to the company's development.

Looking forward to the future, on the one hand, with technological iteration and the improvement of market education, the product penetration rate is rapidly increasing; on the other hand, going out and asking is rapidly extending business boundaries to empower more fields. The company is gradually moving from the automotive business to scenarios such as smart vehicles, the Internet of Things, finance, and IoT.

The SDIC Securities Research Institute pointed out that this round of AI technology iterative upgrades will gradually shift from technological breakthroughs to application implementation, which is expected to drive the company's AIGC solution revenue to achieve rapid growth. The SDIC Securities Research Institute further predicts that the company's revenue for 2024-2026 will be 588 million, 764 million, and 965 million; realized net profit to mother will be 20 million, 113 million, and 170 million, which means that the company's profit will increase more than seven times over the next three years. This prediction fully proves that going out and asking has strong alpha logic support.

AI is in an exciting phase of development. With its first-mover advantage, technological innovation and commercialization capabilities, it is expected to accelerate the release of performance potential and usher in opportunities for beta and alpha resonance.