Brokerage Morning Meeting Highlights | The computing power industry is still growing but will return to rationality.

On the previous trading day (October 23), the Shanghai Composite Index rose 0.89% to 3,690.48 points, the Shenzhen Component Index rose 2.79% to 11,673.83 points, and the ChiNext Index rose 4.16% to 2,684.10 points; turnover in the two markets was 2,490.767 billion yuan; across the market, 4,526 stocks rose, 909 fell, 142 were flat, 82 hit the limit up, and 2 hit the limit down. Sinolink believes that China and the US are each constrained by shortcomings in resource conversion in AI competition, and the distribution of technological gains and transformation costs will affect the global industrial landscape; EB SECURITIES believes that the recent market adjustment is more of an emotional disturbance, and a repair window after risk release may emerge in the short term; CITIC SEC believes that the computing power industry is still growing but will return to rationality, and the US stock market must be alert to adjustment risks; Huafu Securities believes that the realization of indium phosphide prosperity and the visibility of overseas demand corroborate each other, and the slope of industry prosperity is expected to be supported again; Guotai Haitong believes that the housing price cycle is expected to bottom out around 2027, and the cyclical repair of the industry still has a long way to go. Sinolink: Why do China and the US continue to increase AI investment? China and the US each have advantages and are each constrained by shortcomings in resource conversion. The US leads in chips and capital, but power access and equipment delivery slow commissioning; CHINA POWER has an advantage in infrastructure, but advanced chips are restricted. Competition depends not only on the scale of investment but also on the speed of breaking through bottlenecks. Companies that slow R&D may lose market position; at the national level, the US seeks to convert technological leadership into growth, while China strives to break through technological constraints. This competition may make both sides stronger, but not all participants will benefit; the distribution of technological gains and transformation costs will profoundly affect the global industrial landscape. EB SECURITIES: Repair window opens after sentiment release, market may extend rebound In the short term, the market may usher in a "repair window after risk release." On the one hand, the recent market adjustment is more of a short-term disturbance from sentiment and trading structure rather than a systemic deterioration in fundamentals; on the other hand, as economic resilience becomes evident, valuation cost-effectiveness is restored, and policy and capital form a synergy, the medium- and long-term allocation value of A-shares is emerging. CITIC SEC: The computing power industry is still growing but will return to rationality A CITIC SEC research report said that China and the US computing power sectors are in a highly prosperous construction cycle. Amid rapid growth, North American computing power construction faces difficulties at both the investment and financing ends: first, can investment be recouped? Second, can financing absorb it? China's computing power capital expenditure has large room for growth, and the state-owned capital system, credit costs, and infrastructure carrying conditions are favorable. The key lies in the performance and volume ramp-up of domestic computing power chips, and a supply release node may be reached in 2028. Overall, CITIC SEC believes the industry is still growing but will return to rationality. Considering the high concentration of scale, valuations comparable to the "tech bubble," and a rebound in capital market "drainage" with narrowing net "injection," the US stock market must be alert to adjustment risks. Huafu Securities: Steep slope determines high elasticity Substrate prices have risen continuously during the year. According to SMM, as of October 23, the average prices of domestic 4/3/2-inch indium phosphide substrates were raised to 7,100/3,900/1,275 yuan/piece (year-to-date +64.9%/+97.0%/+5.8%); overseas 6-inch quotes are $2,5005,000/piece, and the substrate supply-demand gap continues to show through price transmission. Domestic market Q3 results were concentrated in realization. Yunnan Lincang Xinyuan Germanium Industry's Q3 single-quarter revenue was 632 million yuan (+134.6% YoY), and net profit attributable to shareholders was 102 million yuan (+2,642% YoY). The third-quarter report attributed the performance growth to two points: first, significant increases in demand from downstream AI data centers, optical communications, and other markets increased sales of compound semiconductor materials such as indium phosphide YoY; second, affected by market supply-demand relations and market price fluctuations, the average selling price of indium phosphide products rosedriven by both volume and price in the same direction. Balance sheet leading indicators also point to continued tightness: contract liabilities at period-end were 198 million yuan (+12,367% vs. beginning of period), mainly due to an increase in advance receipts for indium phosphide and other products. Contract liabilities lock in demand first, and profits are realized afterward; industry prosperity has accelerated through to the income statement. Overseas demand visibility extends to 2028. On October 21, NVIDIA signed agreements with six suppliers including SPIL at GTC Berlin; CPO optical engine capacity is planned to expand 15-fold by mid-2027 and double again by the end of 2028, and demand pull is transmitting to upstream materials. The institution believes that domestic prosperity realization and overseas demand visibility corroborate each other, and the slope of industry prosperity is expected to be supported again. Guotai Haitong: Has the real estate cycle bottomed out? Learning from Japan's experience requires avoiding mechanical analogies. Japan's "lost 30 years" was not only caused by the bursting of the real estate bubble but also followed by the ASIA FINANCIAL crisis and the dot-com bubble shock, compounded by premature hollowing-out from manufacturing relocation and vacillating fiscal policythe result of multiple factors resonating. China differs significantly from Japan in external shocks, the pace of corporate overseas expansion, and the fiscal response framework; simple benchmarking easily exaggerates the long-term downside risk of housing prices. Studying international patterns should rely on larger samples close to the law of large numbers to improve the reliability of judgments. The housing price cycle is expected to bottom out around 2027. Referring to the 29 deep housing price downturn cycles in BIS statistics, cases with actual housing price declines exceeding 35% fell by an average of 40% and lasted six years, showing deep adjustment in the first three years and slow decline in the latter three years. Domestic housing prices entered a downward channel at the end of 2021, adjusted sharply from 2022 to 2024, and the decline is expected to continue narrowing in 2025-2026, pointing to a bottoming out around 2027 in terms of pace. The cyclical repair of the real estate industry still has a long way to go. Stabilization of housing prices is not equivalent to overall stabilization of the industry. From a flow perspective, second-hand housing recovers first, with viewing and transaction volumes rising, but new home sales area has seen an expanded YoY decline, household medium- and long-term credit growth is weak, and market heat has not yet transmitted to new homes. From a stock perspective, developers' cash collection and financing remain sluggish, bank medium- and long-term loans to real estate have weakened continuously and turned negative in Q2, and land acquisition and new construction indicators are still bottoming. It will still take a long cycle for developers to complete the repair from stopping the bleeding to self-generating cash flow. Real estate-related economic sectors show divergence. Real estate transmits to the industrial economy and local finances through the income statement and affects the household sector through the balance sheet. At present, downward pressure in the real estate chain is easing marginally; combined with stabilizing industrial policies and high export growth, industrial capacity is continuing to clear, and the industrial side will likely enter a bottoming range. Land transfer revenue growth and land premium rates remain weak, and local finances are still fluctuating at the bottom. In contrast, the household sector continues to shrink its balance sheet, housing loan balance growth has turned negative, and willingness to borrow and consume is insufficient; the repair process should not be rushed. If exports slow in the future, the central government is likely to increase leverage. The fundamental repair of household balance sheets lies in income growth, but in the short term there is limited room to raise the share of labor compensation; external demand and central fiscal action are more realistic levers. In recent years, exports and fiscal policy have been the pillars supporting the economy, while exports face pressure from a high base and marginal slowdown, and consumption still needs a boost. Considering household deleveraging, strong constraints on local debt resolution, and cautious corporate capacity expansion, only the central government has room to increase leverage, promoting a shift in fiscal spending from hardware investment to human capital investment.