Guosen Securities released a research report saying that AI is still the main line of technological development, and AI infrastructure and applications are reinforcing each other and becoming the core growth driver of the semiconductor industry. On the application side, OpenAI held a 12-day product launch conference and launched the O3 model; Byte held a volcano engine power conference and officially launched the visual understanding model, with an input price of 0.003 yuan per thousand tokens, which is 85% lower than the industry average price, which is equivalent to one dollar can process 284 720P pictures; Lenovo held the Tianxi Ecological Partner Conference with the theme of "AI Ecology, the Future Has Come", and continued to recommend Hengxuan Technology (688608.SH) and Espressif Technology (688018.SH) on the AI side.

On the infrastructure side, the CEO of Broadcom said that the company's customers are formulating AI infrastructure investment plans for three to five years, and it is expected that the investment boom of big technology companies in artificial intelligence will continue until the end of 2030 688141.SH 688008.SH. In addition, TechInsights expects global IC sales to increase by 17% and IC sales by 26% in 2025, and continues to recommend companies such as SMIC (688981.SH) and Hua Hong Semiconductor (01347) that benefit from the increase in capacity utilization and local production.

The main views of Guosen Securities are as follows:

The SW Semiconductor Index fell 0.25% in December, and its valuation is at the 70.17% quantile since 2019

In December 2024, the SW Semiconductor Index fell 0.25%, underperforming the electronics industry by 0.73pct and the CSI 300 Index by 0.71pct, while the overseas Philadelphia Semiconductor Index rose 1.08% and the Taiwan Semiconductor Index rose 7.89%. From the perspective of semiconductor sub-industries, digital chip design (+8.20%) and integrated circuit packaging and testing (+0.98%) are among the top gainers; Semiconductor materials (-11.98%) and semiconductor equipment (-11.45%) rose and fell. As of December 31, 2024, the SW Semiconductor Index PE (TTM) was 88.57x, which is at the 70.17% quantile since 2019. In the SW semiconductor sub-industry, the PE (TTM) of semiconductor equipment and integrated circuit packaging and testing is low, which is 54 times and 61 times, respectively; The valuation of analog chip design and digital chip design exceeds 100x; Semiconductor equipment is at the lowest valuation level since 2019, at the 17.06% percentile.

In 3Q24, the heavy position of semiconductors was 8.6%, overweight by 4.9pct

In 3Q24, the market value of the electronics company held by the fund was 399.5 billion yuan, with a shareholding ratio of 13.96%; The market value of semiconductor companies was 246.4 billion yuan, and the shareholding ratio was 8.6%, an increase of 0.2 pct from the previous month. Compared with the 3.7% market value of semiconductors, it is overweight by 4.9pct. Among the top 20 heavy stocks in 3Q24, Xinyuan Micro, Fengyi Technology, and Shanghai Silicon Industry were added, replacing Zhuosheng Micro, Jacques Technology, and Rockchip.

Global semiconductor sales in November increased by 20.7% year-on-year, while DRAM and NAND Flash contract prices both fell

According to SIA data, global semiconductor sales in November 2024 were US$57.82 billion, up 20.7% year-on-year and 1.6% month-on-month, with 13 consecutive months of year-on-year growth and a record high; Among them, China's semiconductor sales were US$16.18 billion, a year-on-year increase of 12.1% and a month-on-month decrease of 0.1%. In terms of storage, both DRAM and NAND Flash contract prices fell in November, while DRAM spot prices rose in December. In addition, TrendForce expects the contract price of DRAM to fall by 0%-5% in 1Q25, of which general DRAM will fall by 8%-13%; The NAND Flash contract price is expected to fall by 10%-15%. Based on the November revenue data of Taiwan-listed semiconductor companies, IC design/manufacturing/packaging and testing all increased year-on-year and decreased month-on-month; DRAM chips decreased year-on-year.

Investment strategy: AI infrastructure and applications are mutually reinforcing, and IC sales are expected to grow by 17% in 2025

AI is still the main line of technological development, and AI infrastructure and applications are reinforcing each other, becoming the core growth driver of the semiconductor industry. On the application side, OpenAI held a 12-day product launch conference and launched the O3 model; Byte held a volcano engine power conference and officially launched the visual understanding model, with an input price of 0.003 yuan per thousand tokens, which is 85% lower than the industry average price, which is equivalent to one dollar can process 284 720P pictures; Lenovo held the Tianxi Ecological Partner Conference with the theme of "AI Ecology, the Future Has Come", and continued to recommend Hengxuan Technology, Espressif Technology, Jingchen Shares, Aiwei Electronics, Shengbang Shares, etc. On the infrastructure side, the CEO of Broadcom said that the company's customers are formulating a three- to five-year AI infrastructure investment plan, and it is expected that the investment boom of big technology companies in artificial intelligence will continue until the end of 2030. In addition, TechInsights expects global IC sales to increase by 17% and IC sales by 26% in 2025.

Risk warning: the domestic substitution process is less than expected; Downstream demand is less than expected; the risk of increased competition in the industry; The risk of adverse changes in international relations.