Central China Securities has released a research report stating that the overall media sector significantly underperformed the broader market in the first half of 2026, with reduced fund holdings and valuations currently in a historically low range. Within the AI application field, AI short dramas and AI marketing are currently in leading positions. The report recommends focusing on the medium to long-term direction of AI multimodal applications. The gaming industry enjoys high market vitality. Within the gaming sector, some companies are driving improvements in profitability and performance growth through strong product capabilities, with profit margins and profit scale continuing to rise. In terms of valuation, the overall gaming sector and some gaming companies with excellent performance growth are currently at historically low valuation levels. The main views of Central China Securities are as follows:
Media Index Underperforms the Market
As of June 18, 2026, the media index has fallen by 16.90% year-to-date, underperforming indices such as the ChiNext, the CSI 300, and the Shanghai Composite. It ranks 24th among 31 industry sectors in terms of performance. Some segments within the media sector are positioned more downstream in the industrial chain, specifically in the AI application field. Compared to the more certain near-term performance of upstream computing hardware, AI applications currently lack breakout applications and clear, large-scale commercialization, leading to a relatively lagged impact on company earnings and industry fundamentals. Consequently, influenced by market concentration and capital flows, apart from the internet advertising & marketing and social & interactive media segments which saw gains driven by GEO and AI application themes, most other segments experienced significant declines. The overall media sector clearly underperformed the market in H1 2026, with reduced fund holdings and valuations at a historical low.
Strong AI Computing Supply and Demand, Promising Future for AI Applications
On one hand, global tech giants are increasing capital expenditures for computing infrastructure, indicating a clear upward industry cycle that provides hardware foundation for the subsequent large-scale deployment of AI applications. On the other hand, changes in the supply side of the content industry, market expansion, and the gradual implementation of AI applications driven by the iteration of AI multimodal technological capabilities are expected to become key drivers for the next cycle in the media sector. Related sectors are also expected to see performance improvement and growth, supporting valuation recovery and an uplift in valuation centers. Within the AI application field, AI short dramas and AI marketing are currently in the vanguard. The report suggests focusing on the medium to long-term direction of AI multimodal applications.
Gaming Sector Fundamentals Strong, Valuations at Bottom Range
The gaming industry exhibits high market vitality. Within the gaming sector, some companies are enhancing profitability and driving performance growth through excellent product strength, with continuous improvement in profit margins and profit scale. In terms of overseas expansion, the competitiveness of domestic Chinese games is increasing, with leading positions in certain global categories, highlighting differentiated competitive advantages and becoming a significant growth area for gaming companies. Regarding AI empowerment, the use of AI's multimodal capabilities to enhance game development efficiency in areas like coding, art, and operations/promotion has been validated. In terms of gameplay innovation, features like AI NPCs/teammates have entered the substantive implementation stage, and native AI products like AI companions are also being explored and tested. In terms of valuation, the overall gaming sector and some gaming companies with outstanding performance growth are currently at historically low valuation levels. The report recommends focusing on companies such as 37 Interactive Entertainment, Perfect World, G-bits Network Technology, and Kaiying Network.
Risk warnings include: slower-than-expected development and commercialization of AI applications; performance volatility of content products affecting sector and company earnings; legal risks related to AI content copyright; intensifying industry competition; and changes in regulatory policies.