According to the Intelligent Finance APP, the Ministry of Industry and Information Technology and other eleven departments recently issued a notice on promoting the coordinated development of new information infrastructure. The notice emphasizes the support for the coordinated construction of data center clusters and new energy bases, and the promotion of the coordinated development of computing power infrastructure with energy and water resources. It also strengthens the planning of local data centers, reasonably distributes regional hub nodes, and gradually increases the proportion of intelligent computing power. Ping An Securities pointed out that from the focus of computing power infrastructure construction in Beijing and major provinces and cities in China, intelligent computing power, general computing power, and supercomputers will enter a phase of coordinated development in the future, and the overall supply of computing power will be greatly increased. At the same time, the independence of computing power industry chain and the construction of "green" computing power will be accelerated, and the demand for related products and services will take a step forward.

Benefiting from the wave of large-scale and generative AI since last year, the demand for intelligent computing power has grown rapidly, making it the mainstream computing power. Since this year, many places in China have issued relevant action plans to plan the scale of intelligent computing power supply.

Earlier, the "Beijing City Computing Power Infrastructure Construction Implementation Plan (2024-2027)" mentioned that by 2025, the scale of intelligent computing power supply will reach 45 EFLOPS. The relevant implementation plan of Shanghai shows that by 2025, the scale of intelligent computing power will exceed 30 EFLOPS. Tianjin, Jiangsu, Hebei and other places have also released targets related to the construction of intelligent computing power this year.

With clear planning for computing power infrastructure, computing power centers are playing a platform value.

By 2025, the domestic computing power planning will exceed 300 EFLOPS, and the proportion of intelligent computing will reach 35%. Security and controllability are one of the important development goals for domestic intelligent computing centers. Building a national integrated service system for computational network, by 2023, more than 200 data center projects have been signed, under construction, or completed in the eight major hubs of East and West China. Multiple provincial and national level computational scheduling platforms have been implemented. At the same time, the average PUE requirements for national hub node intelligent computing centers will be reduced to below 1.25, and by 2027, the scale of the domestic liquid cooling market will reach 8.9 billion US dollars. As for the construction entities, in 2023, the government, operators, and enterprises will account for 22%, 26%, and 52% of the total construction quantity in China, respectively, bringing significant increases in computing power demand in the manufacturing, finance, and telecommunications sectors.

Among them, the domestic intelligent computing solution has been well adapted, and there has been an increase in the implementation of large-scale projects.

Many places have introduced policies for the localization of smart computing centers. Beijing is expected to achieve complete control of smart computing infrastructure hardware and software by 2027, while Shanghai aims for domestic-made computing chips to account for over 50% of usage in new smart computing centers by 2025. Beijing is building a national program for digital economy computing centers, with plans to complete 1000P by the end of 2024 and 2000P in the medium term. Before 2023, smart computing centers in cities such as Wuhan, Chengdu, and Xi'an have long adapted to domestic computing solutions. By 2023, the number of domestically-made computing centers has risen to 19, with Huawei accounting for approximately 85% of the smart computing center solutions announced by Huawei in 2023. Huawei's computing power has won large contracts in telecom operator tenders. China Mobile's new smart computing center in 2024-2025, for example, has a server bid package amounting to 19.1 billion yuan. China Mobile's smart computing center (Hohhot) has deployed about 0.02 million AI acceleration cards, with a domestic chip localization rate of over 85%.

In addition, the scale of computing power and the number of centers continue to grow, confirming the industry's prosperity in terms of construction and implementation.

The number of bidding projects in March 2024, excluding seasonal factors, exceeded that of other months, with projects mainly led by enterprises accounting for 72% of the total. In February, March, and May 2024, benchmark computing center projects including Yinchuan Smart Computing Center, Suzhou Artificial Intelligence (Taihu) Computing Center, Runze (Langfang) International Information Port B-1, B-2 projects, among others, were launched. In recent years, especially for smart computing centers led by telecom operators and governments, more will be delivered in 2024-2025, while the shelfing and delivery of enterprise-type data centers will depend more on demand rhythms. In the first half of 2024, the total scale of delivered smart computing centers has already exceeded 70% of the total for the entire year of 2023, reflecting the accelerated implementation and optimistic delivery of smart computing centers.

According to the Insight Report on Computing Power Development Trends in 2024 published by CCID Consulting, China's computing power scale will see explosive growth in the next three years. It is estimated that by 2026, China's computing power scale will exceed 360EFLOPS, with a compound annual growth rate of 20% over the three years. In addition, in order to meet the explosive demand for computing power brought about by AI large models and the like, the proportion of intelligent computing power and supercomputing power will continue to increase. It is estimated that by 2026, the sum of China's intelligent computing power and supercomputing power will reach 40%.

Open Securities believes that on one hand, driven by AIGC, the scale of AI investment in China is expected to grow rapidly, with strong demand from downstream industries such as the Internet, telecom operators, and governments, leading to intensive implementation of smart computing projects. On the other hand, under the US AI ban, it is imperative to develop domestic computing power. Domestic computing power represented by Huawei's Ascend, Hygon, and Cambricon is rising and there is strong bullish sentiment towards domestic AI computing power.

Related concept stocks:

China Communications (02545): As the "first share of computing infrastructure" in the Hong Kong stock market, China Communications focuses on the construction and operation of telecommunications infrastructure and digital solutions. With the advent of the global computing power era, the three major telecom operators shoulder the mission of building powerful domestic computing power. As the core of the network carrying capacity of computing infrastructure, there is an explosive demand for telecommunication infrastructure and digital solutions in the market.

China Mobile (00941): China Mobile will launch a new "capability + computing power" package that can be flexibly configured and freely combined. At present, it has built a "3+2+1" computing power terminal product system. "3" refers to the development of three thin terminal products: cloud phones, cloud computers, and mobile cloud high-definition. "2" refers to the development of two types of fat terminal products: prosperity-shop computing power hosts and computing power home hosts. "1" refers to the development of a unified cloud OS platform, realizing the unified management and resource scheduling of computing power terminal products.

China Telecom (00728): China Telecom currently has more than 700 data centers, more than 3,000 edge computing centers, 0.513 million IDC racks, and the rack utilization rate has surpassed 70%. By the end of 2023, China Telecom's total computing power scale is expected to reach 6.2 eflops.