What happened
In the second half of the year, the investment boom in AI computing hardware has cooled, and public funds are shifting their focus from upstream technology infrastructure to downstream applications with commercial viability.
The debut of China's first AIGC long drama 'Journey to the West: The Later Chapters' on August 31 sparked market enthusiasm, leading to a surge in stocks like Mango Excellent Media, which rose about 50% in five trading days.
Fund managers are now using metrics like annualized recurring revenue (ARR), cash flow, and financial reports to select AI application stocks, moving away from pure narrative-driven investing.
Why it matters
This shift signals a critical turning point in AI investment, from concept speculation to commercial validation, as the market begins to reward companies that demonstrate real revenue and cash flow generation.
The move indicates that AI hardware's dominance is waning, and software applications are gaining favor due to their potential for higher growth and profitability, creating a seesaw effect between the two sectors.
Key facts
The AIGC long drama 'Journey to the West: The Later Chapters' was produced by Mango TV's 'Mango Lingchuang' platform with support from ByteDance's Seedance.
Mango Excellent Media's stock rose about 50% in five trading days following the drama's release.
Some funds, like Dongfang Hong Xin Dong Li, reduced holdings in hardware companies such as Dier Laser and Nanxin Technology, while increasing stakes in Mango Excellent Media.
AI application companies like MiniMax reported strong ARR growth, with August ARR exceeding $800 million.
Fund managers emphasize using ARR as a key metric to evaluate AI applications, as it reflects sustainable, recurring revenue.
What to watch next
Watch whether AI application companies can sustain ARR growth and translate it into actual profits, as the market will increasingly rely on financial reports to validate the hype.
Monitor the performance of AI short dramas and other applications in overseas markets, where user willingness to pay is stronger, potentially driving further revenue growth.
Observe if the seesaw between AI hardware and software continues, and whether more funds will follow the trend of shifting from hardware to applications.