The increasing global demand for AI technology is driving a explosive growth trend in AI computing power requirements.

According to IDC data forecasts, the global data volume will skyrocket from 33ZB in 2018 to 175ZB in 2025, more than fivefold increase. This directly drives the demand for more powerful data processing capabilities, with increasing computing power becoming a key factor in addressing this challenge.

In this context, technology companies, especially enterprises in the cloud computing sector, are increasing investments in AI and computing power products to enhance their competitive position in the AI era.

The latest financial reports from overseas tech giants represented by the four major cloud vendors intuitively verify this trend. In Q3 of this year, Microsoft, Amazon, Google, and Meta saw a year-on-year capital expenditure growth of over 59%, indicating the sharp increase in AI computing power demand and the high priority placed on computing resources globally.

In response, Open Source Securities points out that the financial reports of AI giants confirm that AI development is gradually entering a positive cycle, with increased enterprise investments in AI infrastructure showing a continuous bullish attitude towards the computing power industry chain. This trend indicates that AI is now able to effectively drive revenue growth for enterprises, becoming a key driving factor for the future development of technology companies.

Recently, Lenovo released its performance for the second quarter of the fiscal year 2024/2025 ending on September 30, 2024, revealing a key signal: the hybrid AI strategic layout is already effective, and the growth flywheel is starting to accelerate.

In other words, in the new era of computing power, Lenovo's hybrid AI architecture has long departed from the traditional PC valuation logic, ushering in a new phase of AI value reassessment.

1. Comprehensive growth in revenue and profits, breaking multiple new records

Performance data, as a core indicator showcasing the company's development trends, in this fiscal quarter, Lenovo achieved comprehensive growth in AI hardware, AI infrastructure, and AI solutions by seizing the opportunity of hybrid AI to build a differentiated competitive advantage.

The financial report shows that Lenovo achieved a revenue of 127.9 billion RMB, a nearly 24% year-on-year growth, with the revenue from non-PC businesses accounting for almost 46%. This increase in proportion demonstrates Lenovo's success in diversification strategy and its expansion in the non-traditional PC market.

If divided by business segment, all main business revenues have achieved double-digit strong growth for the first time in the past three years.

In the IDG smart device business, the company achieved a revenue of 96.8 billion RMB, a 17.4% year-on-year growth. Among which, the personal computer business revenue increased by 12.1% year-on-year, exceeding the market average level, further widening the global market share gap with the second player by over 4 percentage points. The revenue of the smart phone business saw an even higher year-on-year growth rate of up to 43%, achieving the highest quarterly sales volume in history and the highest market share in the past decade. According to the latest statistics from IDC, Lenovo's mobile business has entered the top 5 in total revenue in other global markets. In the second quarter, Lenovo's market share in the vertical folding screen market even reached the top spot globally.

In the ISG infrastructure business, the company achieved a revenue of 23.7 billion RMB, a 65% year-on-year growth, marking a historical high for the second consecutive quarter. Among which, the combined revenue of storage, software, and service business increased by 35% year-on-year, with the revenue of Neptune liquid-cooled servers growing by over 48% year-on-year, both hitting historic highs.

In the SSG Solution Services business, the company achieved a revenue of 15.5 billion RMB, a nearly 13% year-on-year growth, with an operating profit margin exceeding 20%, maintaining double-digit strong revenue growth in consecutive 14 quarters. Among which, driven by AI solutions, the revenue from operation services, projects, and solution services increased by 3 percentage points compared to the same period last year, accounting for almost 60% of SSG's overall revenue.

At the same time, Lenovo's profitability is continuously being unleashed. According to non-Hong Kong financial reporting standards, the company's net income reached nearly 2.9 billion RMB, a 48% year-on-year growth; in the first half of the yearfree cash flowAlmost three times the same period last year, an increase of $0.801 billion year-on-year; the net cash balance increased to $0.595 billion, providing a solid cash reserve for the company's future business growth.

In addition, Lenovo continues to maintain a high dividend ratio, announcing the mid-term dividend distribution ending on September 30, 2024, at 8.5 Hong Kong cents per share, totaling approximately $0.1355 billion.

If the timeline is extended, it can be seen that Lenovo has consistently paid dividends in recent years without interruption. According to wind data, the company has paid cash dividends 20 times, with a total cash dividend amount of 40.762 billion yuan, and an average dividend rate of nearly 50%. This ongoing dividend strategy not only demonstrates Lenovo's focus on shareholder interests but also highlights the company's confidence in its financial position, as well as its unique value and investment attractiveness in the capital markets.

2. The initial effectiveness of the hybrid AI layout is evident, and the growth engine is accelerating.

Of course, the overall growth in performance is closely related to Lenovo's proactive layout in the field of hybrid AI.

At the 2023 Tech World Conference last year, Lenovo first proposed the concept of "defining the future as hybrid artificial intelligence." Lenovo Group's Chairman and CEO Yang Yuanqing once stated that hybrid AI has become a core keyword in Lenovo's future strategic layout, connecting Lenovo's role as a PC manufacturer in the past and a future AI service integrator.

Therefore, Lenovo continues to focus on building a full-stack artificial intelligence product portfolio covering infrastructure, edge devices, and services, enabling it to become an industry leader in the paradigm shift of AI. The financial report shows that the company's R&D expenses in this fiscal quarter increased by 8% year-on-year, reaching $1.024 billion, demonstrating its significant emphasis on technological innovation.

At the 2024 Tech World Conference in October of this year, Lenovo joined forces with six global AI giants including NVIDIA, AMD, Intel, Meta, Microsoft, and Qualcomm to launch a hybrid AI solution, providing end-to-end support from edge to cloud for enterprises, accelerating the practical application of AI technology in various fields.

During the event, Lenovo showcased and launched a series of hybrid AI products, technologies, and services, providing global customers with more intelligent, efficient, and reliable solutions, further solidifying its leadership position in the field of hybrid AI.

This includes Lenovo's Hybrid AI Advantage for enterprises, the next-generation Lenovo Neptune liquid-cooled server, the latest ThinkPad X1 2-in-1 Aura Edition AI PC, Lenovo AI Now, the Lenovo Learning Zone AI software platform, and the concept validation of the societal impact through AI, fully demonstrating Lenovo's profound strength in the field of hybrid AI.

Tangible business empowerment is evident, for example, Lenovo's long-term layout in the AI PC field has paid off. Its AI-powered Lenovo PCs provide personalized recommendations, voice interactions, and other AI services, meeting the modern consumers' demand for personalization and intelligence. Data shows that in the Chinese market, Lenovo's AI PCs already account for 14% of its laptop shipments.

In the ISG business, AI servers equipped with Neptune liquid cooling technology can reduce power consumption by up to 40%, helping enterprises cope with increasing data processing and computing needs. This innovative solution not only enhances operational efficiency for enterprises but also sets Lenovo apart in the global market, winning more market share and customer trust.

With the ongoing global investment surge in the AI field, Lenovo's ISG business is poised to drive growth strongly, replicating its success in the PC and mobile businesses, further consolidating and expanding its market influence and competitiveness in infrastructure solutions.

In general, AI technology is gradually penetrating into various industries and fields, becoming a key force driving social progress and economic development. The deep application and practical benefits of AI technology have become a consensus for industry development.

At this stage, the development of AI technology needs to balance security and inclusivity, ensuring the reliability and wide applicability of the technology. Therefore, the inevitable choice is the hybrid AI mode where public AI, personal AI, and enterprise AI coexist and complement each other, meeting the needs of different users and scenarios while promoting the innovation and application of AI technology.

With a profound understanding of the development trends of AI technology, Lenovo has built an AI ecosystem covering hardware, software, and solutions by integrating cloud computing, edge computing, and intelligent terminal equipment, showcasing not only its deep understanding of the trends in AI technology but also its positive results in technological innovation.

Believing that with the continuous advancement of hybrid AI technology innovation, the company will continue to maintain its leading position in the field of hybrid AI in the future, bringing more innovation and value to users, ultimately driving profitability and valuation growth.

3. AI Empowerment Leading, Value Reshaping in Progress

Looking at the capital markets, in the current global AI technology sector, the market-to-earnings ratios of major giants are generally high, reflecting the market's high recognition and expectations for the future growth potential of these AI+ companies. According to the data from Futubull, Nvidia's P/E ratio is 66.56 times, Microsoft is 34.27 times, and AMD is as high as 119.38 times.

However, compared to these global AI technology giants, Lenovo Group's P/E ratio is only 12.34 times, far below the industry average level. This phenomenon may indicate that the market may not fully recognize the potential and intrinsic value of Lenovo in the AI field, with its valuation judgment still lingering in traditional PC valuation logic.

Looking from a different perspective, as one of the very few global technology companies capable of establishing top-tier ecosystem circles with the six major AI giants including Nvidia, AMD, Intel, Meta, Microsoft, and Qualcomm, Lenovo's influence and business development potential in the global technology sector should not be underestimated. This ecosystem not only provides Lenovo with deep, powerful, and even exclusive technological support but also serves as ample motivation for the company's business expansion in the global market. From this rare top-tier ecosystem perspective, Lenovo's market cap is far more than the current 100 billion RMB, not to mention the role of a leader in hybrid AI.

Now, with the gradual integration of Lenovo's hybrid AI strategy, its continuous innovation and breakthroughs in emerging fields such as AI, cloud computing, and smart devices signal the further unleashing of the company's growth potential. The market will gradually recognize and reassess Lenovo's growth potential in these areas, and we have reason to believe that Lenovo's market cap will reflect its global influence and business potential. This is not just recognition of Lenovo's current performance but also expectations for its future growth potential.

I believe the market will eventually give its own judgment on the value of Lenovo.