China Galaxy Securities (CGS) released a research report stating that performance-driven growth and AI empowerment continue to be the core drivers for the media and internet industry. The firm recommends focusing on Hong Kong-listed internet core assets with increasing AI investments and long-term tailwinds, AI applications and related industrial chains with deepening AI integration, as well as content segments demonstrating strong output and stable earnings. Key recommendations include: 1) Hong Kong internet stocks; 2) AI applications and related industrial chains; 3) content segments.

CGS's key observations are as follows:

**Film Industry: Stable Supply with Sequential Recovery** According to Lighthouse Pro, China's November 2025 box office revenue reached RMB 3.55 billion (including service fees), up 89.29% YoY and 36.03% MoM. *Zootopia* dominated with a monthly box office of RMB 1.73 billion, accounting for 54.32% of total revenue.

**Gaming: Dual-Platform Synergy Drives Growth, Stable License Issuance** In October 2025, China's gaming market revenue rose 7.8% YoY to RMB 31.36 billion. Client games performed strongly, with revenue up 29.4% YoY to RMB 7.23 billion, while mobile games grew 2.4% to RMB 22.63 billion. Overseas revenue from self-developed games increased 11.9% to $1.8 billion. Top-performing titles included *Honor of Kings*, *Delta Force*, and *Endless Winter*. In November, 178 game licenses were issued, bringing the yearly total to 1,532, up over 29% YoY, signaling sustained supply-side improvement.

**Advertising: Steady Growth with Diverging Trends Across Categories** CTR data shows ad spending rose 4.3% YoY in Jan-Oct 2025, with October alone up 10.6% YoY (flat MoM). Key growth sectors included telecommunications (80.8% YoY), personal goods (52%), entertainment/leisure (29.1%), and IT/office automation (19.6%). Declines were seen in pharmaceuticals (-16.1%), alcoholic beverages (-12.3%), and cosmetics/toiletries (-6.1%).

**AI Advancements: Long-Context, Multimodal, and Efficiency Focus** November saw intensive AI updates, with major players advancing long-context processing, multimodal fusion, and reasoning efficiency. OpenAI launched GPT-5.1, enhancing coding with "compression" for extended programming. Google’s Gemini 3 improved reasoning and multimodal capabilities, while Meta introduced an Omnilingual ASR system supporting 1,600+ languages. Domestically, Alibaba’s Qianwen app surpassed 10 million downloads in its first week, Baidu’s Ernie 5.0 enabled multimodal I/O, and iFlytek’s Spark X1.5 doubled reasoning efficiency.

**Risks**: Slower-than-expected AI development, content regulation, industry competition, and technology adoption hurdles.